Chapter 4

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

activity

In activity-based costing an activity measure is

an allocation base

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

activity

What are the activities and measures of the batch-level?

Activities Processing purchase orders Processing production orders Setting up equipment Handling material Measures Purchase orders processed Production orders processed Number of setups; setup hours Pounds of material handled; number of times material moved

What are the activities and measures of the Facility-level?

Activities: General factory administration Plant building and grounds Measures: Direct labor-hours* Direct labor-hours*

What are the activities and measures of the unit-level?

Activities: Processing units on machines Processing units by hand Consuming factory supplies Measures: Machine-hours Direct labor-hours Units produced

What are the activities and measures of the Product-level?

Activities: Testing new products Administering parts inventories Designing products Measures: Hours of testing time Number of part types Hours of design time

In activity-based costing, what is calculated by dividing the total cost of each activity by its total cost driver?

Activity rate

Activity Measure

The allocation base for the cost pool (machine hours, number of set ups, etc.) Activity measure is in terms of allocation base, which is the type of activity. (i.e. Electricity is measured in kilowatt.)

Activity Rate

The predetermined overhead rate for the cost pool Activity rate is the cost per usage or type of activity.... (i.e. Electricity rates are $0.50 per kilowatt; $0.50/kilowatt)

Activity Cost Pool

The respective cost for each pool that make up the total overhead costs Cost Pool is the overhead cost, which is measured in total dollars. (i.e. If 100 kilowatts of electricity used in the month., cost is $500)

Activity-based costing (ABC)

is a more accurate way of allocating overhead cost from multiple cots pools

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

may lead to overpriced or underpriced goods

The basis of benchmarking is comparing Blank

performance within the same industry

Designing and advertising a good are both ______-level activities

product

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

sometimes

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

unimportant Managers needs to know what causes a product's costs, regardless of type.