AC 202 CH 6-7 Smartbooks
GAAP and IFRS rules ______.
1. Require segmented financial data be included in annual reports. 2. Require that the same method be used for both internal and external segment reporting. 3. Create problems in reconciling internal and external reports
Activity based costing provides managers with information that affects
both fixed and variable costs
Under absorption costing product costs consist of ______ costs.
both variable and fixed MOH
In activity-based costing, nonmanufacturing and manufacturing costs are assigned to products on a(n) ______ basis.
cause and effect
If a segment is eliminated,____________fixed costs that are not traced to the segment will not change.
common
Individual product costs calculated using ABC are not listed on ______ reports.
external
Traditional cost systems tend to undercost standard products and overcost specialty products.
false
Absorption and variable costing net income are usually different due to the accounting for
fixed MOH
iN recent years, direct labor as a percentage of total cost began declining, which caused overhead to
increase
In a traditional cost accounting system, what type of costs are assigned to products even if the costs are not caused by the products?
manufacturing
Under activity-based costing, nonmanufacturing costs
may be allocated to products based on cause
Segmented income statements
may be prepared for activities at many levels in a company
If a segment is entirely eliminated, common fixed costs will ______.
not change
An example of a transaction driver is the
number of bills sent out to a customer
If some products are overcosted and some are undercosted the errors will
offset each other in cost of goods sold and inventory valuations
In activity-based costing, first-stage allocation assigns
overhead costs
Activity-based costing uses more cost
pools than tradtional costing
The final step in implementing ABC is ______.
prepare management reports
Which of the following help companies channel their resources into the most profitable growth opportunities?
product and profitability reports
A function of sales and the direct and indirect costs that the product causes is the ______.
product margin
In activity-based costing, ______ are different from those calculated using traditional costing.
product margins
The most common reports prepared using ABC data are the product and customer
profitability reports
Customer-level activities include
sales calls mailing catalogs
Costs that can be traced directly to a segment ______.
should not be allocated to other segments
Which of the following items are the same under both ABC and traditional costing?
total sales, costs, net income
An otherwise profitable segment may appear to be unprofitable if
traceable costs are applied to it
One mistake companies make when preparing segmented income statements is arbitrarily assigning
traceable fixed costs to segments
Which costing system does not assign selling and administrative costs to products when computing product margin?
traditional
What level of activity is performed each time an item of a product is produced?
unit level
The variable costing income statement separates
variable and fixed expenses
The number of units produced does not affect net operating income when using
variable costing
Segment contribution margin equals segment revenue minus the
variable expenses of the segment
U.S. GAAP and IFRS ______ publicly traded companies include segmented financial data prepared for external users that use the same methods used in internal segment reports.
require
In activity-based costing, the consumption of overhead resources is caused by ______.
an activity
When calculating the profit impact of discontinuing a segment, consider
the segment's contribution margin the segment's traceable fixed costs
An example of a duration driver is the
time spent preparing invoices
Using absorption costing for segmented income statements can lead to:
under-costing of segments. omission of upstream and downstream costs.
Organization-sustaining activities include
-heating a factory -setting up a computer network -preparing annual reports
Absorption costing net operating income may not agree with the net operating income calculated for CVP analysis due to the way in which ______ is handled in absorption costing.
fixed MOH
Segmented income statements ______.
may be prepared for activities at many levels in a company
Decision-making problems that could occur when using absorption costing include inappropriate
pricing decisions, and dropping profitable products
common fixed cost
A fixed cost that supports more than one business segment, but is not traceable in whole or in part to any one of the business segments.
The difference between reported net income on variable costing and absorption costing income statements is based on how
Fixed MOH is accounted for
What are some of the limitations of activity-based costing systems
Managers and employees may resist the change to ABC. ABC requires substantial resources. ABC procedures produce numbers that do not match traditional costing.
A traceable fixed cost ______.
a fixed cost that is incurred because of the existence of the segment
A characteristic essential for successful implementation of ABC is:
a link to how people are evaluated and rewarded.
Because nonmanufacturing costs are not included as costs of a product, the use of ______ costing can lead to the omission of segment costs.
absorption
Financial statement users need to be aware of changes in inventory levels when using
absorption 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
In ABC, the term cost driver is used to refer to a(n) because it should "drive" the cost being allocated .
activity driver
Total cost of each activity divided by the total activity is the computation of
activity rates
Costs are separated between variable and fixed expenses when using ______ costing, whereas ______ costing separates costs between product and period.
variable, absorption
When inventory increases, absorption costing net operating income is higher than variable costing net income due to the fixed manufacturing overhead ______.
deferred in the inventory account on the balance sheet
Costs assigned and/or traced when computing product margin in a traditional cost system are ______.
direct labor, materials, MOH
Costs of unused or idle capacity are assigned to products when using a(n
traditional costing system
