ACC 216 Chapter Seven (final exam)

A company has two activity cost pools--- Customer Orders and Product Design. The activity rates are $300 per order for Customer Orders and $500 per design for Product Design. How much overhead cost would be assigned to a customer placing 4 orders and requiring 10 designs:

$6,200 $300 x 4 + ($500 x 10) = 6,200

The activity rate for the Customer Orders activity pool is $20 per order. If there are 400 customer orders for a product, the total overhead cost assigned to this product for customer orders is $_____:

$8,000 20x400=8,000

In ABC another term for activity measure is:

cost driver

activity measure:

cost driver

In ABC, ____ allocation is the process of assigning overhead costs to activity cost pools:

first-stage

When using traditional cost system, standard, _____-volume products are generally over-costed and custom, ______-volume products are often under-costed:

high;low

ABC is generally used for ____ reporting:

internal

batch-level:

machine set-up, setting up equipment, placing purchase orders, and arranging shipments to customers receive raw materials from suppliers, issue purchase orders for a job

order size:

machine-hours

customer relations:

number of active customers

customer orders:

number of customer orders

product design:

number of product designs

transaction driver:

number of times an activity occurs

ABC treats organization-sustaining costs as ____ expenses:

period

unit-level:

power to run production equipment, do rough milling work on products

Designing and advertising a product are ________-level activities:

product

product-level:

product design, manage parts inventories

customer-level:

sales calls

Activity rates are used to apply overhead costs to products and customers in the _____-stage allocation:

second

A _____ cost system assigns costs of unused or idle capacity to products:

traditional

Only direct materials, direct labor, and manufacturing overhead are assigned to products under a ____ costing system:

traditional

What level of activity involves costs that arise because each unit of product requires certain resources:

unit-level

Traditional cost systems allocate all manufacturing costs using _____ allocation bases:

volume-related

Steps for implementing ABC in order:

1. define activities, activity cost pools, and 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

Types of costs that might be included in a cost pool based on order size include:

1. factory supplies 2. equipment depreciation

Organization-sustaining activities include:

1. heating a factory 2. setting up a computer network 3. preparing annual reports

Costs assigned and/or traced when computing product margin in a traditional cost system are:

1. manufacturing overhead 2. direct labor 3. direct material

Which of the following items are the same under both ABC and traditional costing:

1. net operating income 2. total costs 3. total sales

The cost of ____ are not assigned to products when using ABC:

1. organization-sustaining activities 2. idle capacity

customer-level activities include:

1. sales calls 2. mailing catalogs

In activity-based costing, which costs are not assigned to products:

1. unused capacity 2. organization-sustaining

What is the total amount of indirect factory wages if the amount allocated to product design was $200,000 and product design consumes 40% of indirect factory wages:

$500,000 200,000/0.40

In ABC, each cost pool accumulates costs that relate to a single ____ measure in the ABC system:

activity

Total cost of each activity divided by the total activity is the computation of:

activity rates

Overhead includes both manufacturing and non-manufacturing costs under:

activity-based costing

activity cost pool:

amount of costs accumulated for a single activity

duration driver:

amount of time to perform an activity

In ABC, the consumption of overhead resources is caused by:

an activity

A reason that ABC is not often used for external reporting is:

the ABC system may not conform to GAAP

What causes traditional and AB costing systems to report different product margins:

1. the ABC system assigns non-manufacturing overhead costs to products on a cause-and-effect basis as appropriate 2. traditional cost systems allocate all manufacturing overhead costs to products 3. traditional cost systems allocate all of the manufacturing overhead costs to products using a volume-related allocation base

costs that can be easily traced to individual products include:

1. warranty repair costs 2. shipping costs 3. sales commission

Comparing the performance within an organization to that of other similar organizations is called:

benchmarking

In activity-based costing, non-manufacturing and manufacturing costs are assigned to products on an _____ basis:

cause-and-effect

An activity ____ pool relates to a single activity measure in the ABC system:

cost

organization-sustaining:

factory cooling system, interview and process new employees in the personnel dept, perform periodic preventive maintenance on general-use equipment, use the general factory building