Pre-Ch 4: Activity based costing

Which of the following is NOT a benefit of activity-based costing to managers?

Managers have numerous cost pools that are identified for each major activity

ABC can be used in ________.

both service and manufacturing company

When making decisions:

some selling and administrative expenses should be assigned to products

Which of the following is not generally part of the design of an activity-based costing system?

Identifying and including all activities that cause overhead costs

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

$30

plaster company expects to have a total cost of $400,000 in its activity pool. The total expected activity is 800 machine set ups. The activity rate is $_________ per setup.

$500

Activity-based costing improves the accuracy of products 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.

In the 1800's:

-costs systems emphasized simplicity -direct labor and overhead was believed to be highly correlated

Activity-based costing is most likely to be beneficial when:

-products differ substantially in batch size and the activities they require -Conditions have changed substantially since the existing cost system was established. -Overhead costs are high and increasing and no one seems to understand why. -Management does not trust the existing cost system and ignores cost data from the system when making decisions.

Implementing activity-based costing:

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

Which of the following issues needs to be considered when implementing an ABC system?

-the cost in each activity cost pool may not be strictly proportional to its activity measure -the cost of designing and implementing the system may outweigh the benefits of the system

Which of the following statements is true?

ABC may be useful to a company whose costs have changed substantially since the existing cost system was developed

A technique that attempts to assign overhead costs more accurately to products is known as :

Activity based costing

Departmental overhead rates may NOT correctly assign overhead costs in situations where a company has:

a variety of products

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

activity

An activity measure is a(n) ______ base in an activity-based costing system.

allocation

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

an activity rate

In activity-based costing an activity measure is _______.

an allocation base

In recent years, as a percentage of total cost:

direct labor has been decreasing, whereas overhead has been increasing

Activity-based management is focused on:

eliminate waste; decrease processing time; reduce defects

Which of the following is NOT an ABC level of activity?

employee-level

The cost of implementing and maintaining an activity based costing system:

may outweigh the benefits received

Activities that occur regardless of which customers are served, which products are produced or how many batches are run or units made are facility-level or _______-_______ activities

organization sustaining

Maintaining a product manager and staff is a(n) _________ activity.

product- level

unit level activities are _______.

proportional to the number of units produced.

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

total cost in the production-order activity cost pool; activity level in the activity cost pool

True or false: The ABC system for applying overhead works just like a job-order costing system.

true

The costs in the activity cost pools are allocated to products using activity rates and activity measures. This is part of stage _______ in allocating overhead costs to products.

two

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

activity cost pool

Setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of ________-level activities.

batch