acct chpt 4 ABC

An activity cost pool accumulates costs for ______ activity measure(s).

exactly one

Costs that cannot be traced on a cause-and-effect basis to individual products are ______ -levelcosts.

facility

When evaluating ABC product costs, managers should be particularly alert to costs that contain allocations of

facility

A security guard patrols the company grounds after normal working hours.

facility level

Insurance costs are incurred on the company's facilities.

facility level

New employees are hired by the personnel office.

facility level

Preventive maintenance is performed on general-purpose production equipment.

facility level

Organization-sustaining activities is another term for

facility level activity

True or false: 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.

Benefits of activity-based costing include ______.

helping managers understand the nature of overhead costs more accurate product costs helping target areas for process improvement

Using volume-based cost drivers to assign overhead when ABC is appropriate ______.

may lead to overpriced or underpriced goods

Usually, traditional costing ______ high-volume products and ______ low-volume products.

overcosts; undercosts over=high under=low

Activity-based costing improves the accuracy of product costs by ______.

using cost pools that are more homogeneous than departmental cost pools using a variety of activity measures to assign overhead costs to products increasing the number of cost pools used to accumulate overhead cost

Performance Products Corporation makes two products, titanium Rims and Posts. compute activity rate

when you compute the activity rate you take the overhead $ amount and divide it by the total expected activity (the sum of both products)

Machine settings are changed between batches of different products.

batch level

Purchase orders are issued for materials to be used in production.

batch level

What type of activities are performed each time a group of units is processed, regardless of how many units are in the group?

batch level

Setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of

batch level activities

Costs at the batch level depend on the number of ______.

batches processed

A systematic approach that can identify improvement opportunities is ______.

benchmarking

Activity-based costing ______.

computes product costs in the same way as traditional costing

Products are assembled by hand.

unit level

An activity that must be done for each item produced is a(n)

unit level activity

Total estimated manufacturing overhead is $900,000 and total estimated activity is 30,000 machine-hours. The plantwide overhead rate is

$30 900000/30000

Given direct material cost of $10, direct labor cost of $15, direct-labor based overhead of $12 and Activity-Based Costing overhead of $16, the total cost of the product using Activity-Based costing is

$41 add direct materials, direct labor, and ABC overhead

Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine set ups. The activity rate is $

$500 400000/800

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

$8000 20x400

A company assigns overhead using a plantwide rate. If total estimated manufacturing overhead is $900,000 and the total estimated activity is 30,000 machine-hours, the overhead cost assigned to a product using 12,000 machine-hours is ______.

($900,000 ÷ 30,000) × 12,000 = $360,000

In ABC, any event that causes consumption of overhead resources is a(n)

activity

Setting up machines, billing customers, and performing tests at a lab are all examples of a(n) ______.

activity

When a company has extensive product diversity and complex overhead, it is best to assign overhead using ______.

activity based costing

A "bucket" in which costs are accumulated that relate to a single activity measure in the ABC system is a(n) ______.

activity cost pool

A predetermined overhead rate in an activity-based costing system is called ______.

activity rate

Modifications are made to product designs.

product level

Parts inventories are maintained in the storeroom. (Each product requires its own unique parts.)

product level

Research & development is a(n)

product level

Implementing activity-based costing ______.

requires taking employees away from other tasks requires substantial resources should be done by a cross-functional team

A plantwide overhead rate based on direct labor hours is ______ appropriate.

sometimes Reason: A plantwide rate based on direct labor hours is appropriate if there is a high correlation between overhead and direct labor. However, in today's environment, that is often not the case.

how to do unit product costs for each product

take the activity rate and multiply it by the total expected activity from each activity pool (DLH, Machine Hours, Machine Setups) add each of these numbers together to get the overhead cost applied then divide by the number of units produced take this number and add direct materials and direct labor to get the total unit product cost

The activity rate is computed by dividing the ______ by the ______.

total cost in the activity cost pool; activity level in the activity cost pool

For decision-making purposes, the distinction between manufacturing costs and selling and administrative expenses is ______.

unimportant