ch 5 cost acc

A well-designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis ________. Select one: a. can be used to eliminate nonvalue-added activities b. is easy to analyze and interpret c. takes the choices and judgment challenges away from the managers d. emphasizes how managers can achieve higher sales

a

Advanced Technology Products produces 10 different fasteners. Each time a type of fastener is produced, the equipment must be stopped and items such as filters and drill bits must be changed, oil must be added to the equipment and some parts need lubrication. This work must be done before the products can be produced, the costs related to this activity would be part of which cost pool? Select one: a. Output-level costs b. Batch-level costs c. Product-sustaining costs d. Service-sustaining costs Feedback

b

It only makes sense to implement an ABC system when ________. Select one: a. a single product is produced in bulk b. its benefits exceed its implementation costs c. it traces more costs as direct costs d. production process is labor-intensive

b

Which of the following ordering of the levels best depicts the cost hierarchy within an ABC system? Select one: a. batch-level, output unit-level, product-sustaining level, and facility-sustaining level b. batch-level, output unit-level, facility-sustaining levels, product-sustaining levels c. output unit-level, batch-level, product-sustaining level, and facility-sustaining level d. facility-sustaining level, output unit-level, batch-level, product-sustaining level

b

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

b

Which of the following has accelerated need for refined cost systems? Select one: a. global monopolies b. rising prices c. intense competition d. a shift toward increased direct costs

c

Which of the following is true of refinement of a costing system? Select one: a. While refining a costing system, companies should identify as many indirect costs as is economically feasible. b. A homogeneous cost pool will use multiple cost drivers to allocate costs. c. It reduces the use of broad averages for assigning the cost of resources to cost objects. d. It is likely to yield the most decision-making benefits when direct costs are a high percentage of total costs. Feedback

c

With traditional costing systems, products manufactured in small batches and in small annual volumes may be ________ because batch-related and product-sustaining costs are assigned using unit-related drivers. Select one: a. overcosted b. fairly costed c. undercosted d. ignored

c

________ are the costs of activities undertaken to support individual products or services regardless of the number of units or batches in which the units are produced. Select one: a. Unit-level costs b. Batch-level costs c. Product-sustaining costs d. Facility-sustaining costs

c

For a company with diverse products, undercosting overhead of a product will lead to product-cross -subsidization which means that: a. direct labor costs of the product are misallocated b. direct material costs of the product are misallocated c. indirect costs of another product are misallocated d. direct costs of another product are misallocated

c. indirect costs of another product are misallocated

Johnson Superior Products Inc. produces hospital equipment and the setup requirements vary from product to product. Johnson produces its products based on customer orders and uses ABC costing. In one of its indirect cost pools, setup costs and distribution costs are pooled together. Costs in this pool are allocated using number of customer orders for the easiness of costing operations. Based on the information provided, which of the following arguments is valid? Select one: a. Johnson has clearly failed to identify as many direct costs as is economically feasible. b. All costs in a homogeneous cost pool have the same or a similar cause-and-effect relationship with the single cost driver that is used as the cost-allocation base for Johnson. c. Johnson has unnecessarily wasted resources by classifying setup and distribution costs as they could have been considered as direct costs. d. Johnson has failed to use the correct cost driver as the cost-allocation base for setup costs.

d

When "available time" (i.e., setup-hours) is used to calculate a cost of a resource and to allocate costs to cost objects , the system is called: Select one: a. job costing b. process costing c. hybrid costing d. time-driven activity based costing

d

Which of the following reasons explain why ABC concepts may be of great value to service companies? Select one: a. It allows for more accurate cost accounting for inventory b. It promotes more accurate cost of goods sold reporting c. It helps make financial reporting more accurate d. A significant portion of the cost structure of a service firm is composed of indirect costs

d

________ costs support the organization as a whole. Select one: a. Unit-level b. Batch-level c. Product-sustaining d. Facility-sustaining

d