ACC 321 Exam 1 review (Ch. 2- 5)

Service companies, in particular, find great value from ABC because a vast majority of their cost structure is composed of _______________ costs.

Indirect

Recognizing ABC information is not always perfect because ___________.

It balances the need for better information against the costs of creating a complex system

For a company with diverse products, undercosting overhead of a product will lead to ____________.

Misallocating indirect costs of another product

ABC and traditional systems are quite similar in ______________.

The treatment of direct costs

contribution margin is calculated as:

Total revenue - total variable costs

a unit cost is computed by _________.

dividing total cost by the number of units produced

cost assignment

encompasses allocating indirect costs to a cost object

The ending balance in the work-in-process control account represents the costs of all jobs that ___________.

have not been completed

manufacturing overhead costs are also referred to as _______________.

indirect manufacturing costs

the allocation base ____________.

is a systematic way to link an indirect cost or group or indirect costs to cost objects

Job Costing

is used to calculate equivalent units

Indirect manufacturing costs _______________.

may include both variable and fixed costs

Undercosting of a product is most likely to result from:

overcosting another product

Traditional cost systems distort product costs because:

they apply average support costs to each unit of product

One reason for assigning selling and distribution costs to products for analytical purposes is ________.

to ensure that all costs are considered

The use of a single indirect-cost rate is more likely to:

undercost low-volume complex products

If products are different, then for costing purposes:

An ABC costing system will yield more accurate cost numbers

Which of the following statements is true of ABC systems? A) ABC systems assume all costs are variable costs B) ABC systems classify some direct costs as indirect costs and some indirect costs as direct costs C) ABC systems provide valuable information to managers beyond accurate product costs D) ABC systems are time-driven cost systems

C) ABC systems provide valuable information to managers beyond accurate product costs

Which of the following statements is true of activity-based costing? A) The main advantage of activity-based costing over peanut-butter costing is the accurate distribution of all direct costs to the products. B) Activity based costing broadly averages or spreads the cost of resources uniformly to cost objects such as products or services. C) Activity based costing is more suited to companies with high product diversity than companies with single product line. D) In activity-based costing, direct labor-hours is always the best allocation base to allocate all non-manufacturing indirect costs.

C) Activity based costing is more suited to companies with high product diversity than companies with single product line.

Which of the following is not a factor in cost-volume-profit analysis? A) Units sold B) Selling price C) Total variable costs D) Fixed costs of a product

C) total variable costs

Which of the following statements is true of activity-based costing? A) Chances of product-cost cross-subsidization are higher in activity-based costing compared to traditional costing systems. B) Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. C) Activity-based costing ignores the allocation of marketing and distribution costs. D) Activity-based costing classifies some of the indirect costs as direct costs.

D) Activity-based costing classifies some of the indirect costs as direct costs.

________ is considered while choosing a cost allocation base for activity costs in ABC costing. A) Market share of a product B) Product Price Level C) Marketing strategy and material price level D) Availability of reliable data and measures

D) Availability of reliable data and measures

which of the following is a fixed cost for an automobile manufacturing plant? A) electricity use by assembly- line machines B) tires C) sales commission D) administrative salaries

D) administrative salaries

Top management compensation cost is an example of _____________ in the cost hierarchy.

Facility-sustaining costs

Direct costs

are costs related to a particular object that can be traced to that cost object in a cost-effective manner.

The budget indirect-cost rate is calculated ___________.

at the beginning of the year

The budget indirect-cost rate for each cost pool is computed as ________.

budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base

inventoriable costs are expensed on the income statement _________.

when the products are sold

Classifying a cost as either direct or indirect depends upon

whether the costs can be easily traced with the cost object

the approach often used when dealing with small amounts of underallocated or overallocated overhead is the ___________.

write-off to cost of good sold approach