Ch 5.7

10) For service organizations that bill customers at a predetermined average rate, activity-based cost systems can help to: A) clarify appropriate cost assignments for various service activities B) identify the profitability of various service activities C) Both A and B are correct. D) None of these answers are correct.

C) Both A and B are correct.

8) A well-designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis: 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) can be used to eliminate nonvalue-added activities

4) Activity-based management (ABM) includes decisions about all EXCEPT: A) pricing and product mix B) smoothing costs C) reducing costs D) improving processes

B) smoothing costs

9) A primary reason for assigning selling and distribution costs to products for analytical purposes is: A) to justify a varied product mix B) that controllers are required to assign all costs when valuing inventories C) that different processes, products, and customers require different quantities of selling and distribution activities D) that all indirect costs must be assigned

C) that different processes, products, and customers require different quantities of selling and distribution activities

5) ABC systems: A) reveal activities that can be eliminated B) help control nonfinancial items such as number of setup hours C) help identify new designs to reduce costs D) All of these answers are correct.

D) All of these answers are correct.

6) Companies use ABC system information to: A) analyze costs B) prepare budgets C) evaluate performance D) All of these answers are correct.

D) All of these answers are correct.

7) It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that: A) product costs will reflect their relative consumption of resources B) nonvalue-added costs can be eliminated C) there is less likelihood of cross subsidizing of product costs D) All of these answers are correct.

D) All of these answers are correct.

3) Activity-based-costing information: A) should be used when services place similar demands on resources B) usually results in peanut-butter costing C) will yield inaccurate cost numbers when products are similar D) may assist in improving product design and efficiency

D) may assist in improving product design and efficiency

14) ABC costing systems are primarily for use in manufacturing and marketing and NOT for design engineering. Answer: TRUE or FALSE

False

11) ABC reveals opportunities to focus on value added activities. Answer: TRUE or FALSE

True

12) Activity-based management refers to the use of information derived from ABC analysis to analyze and improve operations. Answer: TRUE or FALSE

True

13) Information derived from an ABC analysis might be used to eliminate nonvalue-added activities. Answer: TRUE or FALSE

True