Managerial ACC ch 7
Some manufacturing costs may be excluded from product costs when using ______ costing
activity-based
In activity-based costing, the consumption of overhead resources is caused by ______
an activity
In activity-based costing, another term for allocation base or activity measure is ___
cost driver
Which of the following can be combined in activity-based costing?
highly correlated activities
External reports are ___ (more/less) detailed than internal reports
less
Under activity-based costing, nonmanufacturing costs ___
may be allocated to products based on cause
Compared to traditional systems, activity-based costing uses ___ cost pools and unique measures of activity
more
An example of a transaction driver is the ______
number of bills sent out to a customer
In activity-based costing, first-stage allocation assigns ___ costs to activity cost pools
overhead
Activity-based costing uses numerous ___ cost pools
overhead/activity
An ABC system usually ______ a traditional cost system
supplements
A reason that activity-based costing is not often used for external reporting is ______
the ABC system may not conform to GAAP
If the activity rate for the customer order cost pool is $250 per order and the total for this cost pool is $425,000, the total number of customer orders is ______
$1700 ($425,000 ÷ $250 = 1,700)
Activity based costing provides managers with information that affects ______
both variable & fixed costs
Activity-based costing only charges products for the cost of the capacity used because ______
it results in a more stable unit product cost products are only assigned the costs of resources they actually use
All manufacturing costs are assigned to products in ___ costing
traditional/absorption/full
Simple counts of the number of times an activity occurs are ___ drivers
transaction
Power to run production equipment is a(n) ___ -level activity
unit
What level of activity is performed each time an item of a product is produced?
unit-level
Activity-based costing uses activity rates to apply overhead costs to products in ______ stage allocation
second
An example of a duration driver is the ______
time spent preparing invoices
T/F -In an automated environment, using traditional allocation bases based on volume may distort unit product cost
True (Traditional allocation bases tend to overcost high volume and undercost low volume products)
A characteristic essential for successful implementation of ABC is ______
a link to how people are evaluated and rewarded
Individual product costs calculated using ABC are not listed on ______ reports
external
In activity-based costing, the process of assigning overhead costs to activity cost pools is ______ stage allocation
first
In recent years, direct labor as a percentage of total cost began declining, which caused overhead to ___
increase/grow/rise
ABC is generally used for ______ reporting
internal
Which of the following items are the same under both ABC and traditional costing?
-Total sales -Net operating income -Total costs
Activity-based management is focused on ______
-eliminating waste -reducing defects
ABC does not conform to GAAP because it ______
-excludes some manufacturing costs -includes some nonmanufacturing costs
Organization-sustaining activities include ______
-heating a factory -preparing annual reports -setting up a computer network
Customer-level activities include ______
-mailing catalogs -sales calls
Costs assigned and/or traced when computing product margin in a traditional cost system are ______
-manufacturing overhead -direct material -direct labor
Identifying the activities that will form the foundation for the system ______
-often involves interviewing employees -involves a great deal of judgment -can be time-consuming
The most common management reports using ABC data are ______
-product profitability -customer profitability
Activities that could be combined into one batch-level activity are the number of ______
-shipped orders -customer orders received
Costs that can be easily traced to individual products include ______
-warranty repair costs -sales commission -shipping costs
T/F - Traditional cost systems tend to undercost standard products and overcost specialty products
False (The opposite is true - traditional systems undercost specialty products that tend to consume more overhead)
In a traditional cost accounting system, what type of costs are assigned to products even if the costs are not caused by the products?
Manufacturing
Which of the following is not essential for the successful implementation of an ABC system?
Top managers must design the ABC system
Which costing system does not assign selling and administrative costs to products when computing product margin?
Traditional
T/F - Activity-based costing can be used for process improvement
True
A company's products had sales of $750,000 and total costs of $360,000. If the net operating income for the company was $215,000, total overhead costs not assigned to products was
$175,000 (750,000 - (360,000+215,000) = 175,000)
A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and total activity of 20,000 development hours. Using activity-based costing, calculate the appropriate activity rate(s)
$200,000 ÷ 25,000 = $8 per customer call and $300,000 ÷ 20,000 = $15 per development hour
Place the steps for implementing ABC in order
1. Define activities, activity cost pools, & activity measures 2. Assign overhead costs to activity cost pools 3. Calculate activity rates 4. Assign overhead costs to cost objects 5. Prepare management reports
Costs of unused or idle capacity are assigned to products when using a(n) ___ costing system
absorption/traditional/full
The first major step in implementing ABC is to identify the ___ that will form the foundation for the system
activities
In ABC, any event that causes consumption of overhead resources is a(n) ___
activity
In activity-based costing, each cost pool accumulates costs that relate to a single ___ measure in the ABC system
activity
A "bucket" in which costs are accumulated that relate to a single activity measure in the ABC system is a(n) ______
activity cost pool
In activity based costing another term for activity measure is ______
cost driver
A cost pool including costs to entertain clients and make sales calls is a(n) ______ activity
customer-level
The amount of time required to perform an activity is measured by a(n) ___ driver
duration
If some products are overcosted and some are undercosted the errors will ______
offset each other in cost of goods sold and inventory valuations
Activities that occur regardless of which customers are served, which products are produced or how many batches are run or units made are facility-level or ___-___ activities
organization-sustaining
What type of activities are carried out regardless of which customers are served, which products are produced, how many batches are run or how many units are produced?
organization-sustaining
Usually, traditional costing ______ high-volume products and ______ low-volume products
overcosts; undercosts (Traditional costing uses a volume-related allocation base and assigns more costs to high-volume products, resulting in overcosting. In contrast, it assigns fewer costs to low-volume products, resulting in undercosting)
Activity-based costing uses more cost ___ than traditional costing
pools/drivers/measures
The final step in implementing ABC is ______
prepare management reports
In activity-based costing, ______ are different from those calculated using traditional costing
product margins
Activity rates are used to apply overhead costs to products and customers in the ___-stage allocation
second
To reconcile ABC product margin to net income ______
subtract overhead costs not assigned to products
Costs such as factory supplies and power to run machines could be combined in a cost pool based on the number of ______
units produced