Accounting 2102 - Chapter 4

computes product costs in the same way as traditional costing

Activity-based costing ______.

False

Activity-cost rates may either be computed per product or per activity.

more accurate product costs helping target areas for process improvement helping managers understand the nature of overhead costs

Benefits of activity-based costing include ______.

product

Designing and advertising a good are both ______-level activities.

Activity - based

______ - ______ management involves focusing on activities to eliminate waste, decrease processing time, and reduce defects.

$41 (Unit product cost = Direct material cost + Direct labor cost + Manufacturing overhead = $10 + $15 + $16 = $41)

For each unit of a product, the direct material cost is $10, the direct labor cost is $15, and the manufacturing overhead is $16. The total unit product cost using activity-based costing is ______.

$7,800

If the activity rate is $65 per order with a total of 120 orders for a product, the overhead cost assigned to the product is $ ______.

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

Implementing activity-based costing ______.

activity cost pool

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

$360,000 ($900,000 ÷ 30,000) × 12,000 = $360,000

A company assigns overhead using a plantwide rate. If total estimated manufacturing overhead is $900,000 and the total estimated activity is 30,000 machine-hours, the overhead cost assigned to a product using 12,000 machine-hours is ______.

unimportant

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

predetermined overhead rate

estimated total manufacturing overhead ÷ estimated total amount of the allocation base = ______

using a variety of activity measures to assign overhead costs to products using cost pools that are more homogeneous than departmental cost pools increasing the number of cost pools used to accumulate overhead cost

Activity-based costing improves the accuracy of product costs by ______.

True

Activity-based costing relies on a number of critical assumptions which could distort information for making decisions.

eliminating waste reducing defects

Activity-based management is focused on ______.

True

Activity-cost rates are computed per activity and assigned to products based on the use by each product.

unit

An activity that must be done for each item produced is a(n) __ level activity.

some selling and administrative expenses should be assigned to products

The ABC model is useful when an organization is making decisions about how ______.

$8,000

The activity rate for the Customer Orders activity pool is $20 per order. If there are 400 customer orders for a product, the total overhead cost assigned to this product for customer orders is $______.

total cost in the activity cost pool; activity level in the activity cost pool

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

performance within the same industry

The basis of benchmarking is comparing Blank______.

facility - level

Also called organization-sustaining activities, ______ - ______ activities are activities that are carried out regardless of which products are produced, how many batches are run, or how many units are made

$500

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

batch

Processing purchase orders is considered to be a(n) ______-level activity.

may outweigh

The cost of implementing and maintaining an activity-based costing system ______ the benefits received.

total departmental overhead cost; total activity level per department

The departmental-wide predetermined overhead rate is computed by dividing the ______ by the ______.

total manufacturing cost; total activity level

The plant-wide predetermined overhead rate is computed by dividing the ______ by the ______.

overstated for purposes of decision making

A significant limitation of the ABC model is that the product costs computed will most likely be ______.

activity rates

Total cost of each activity divided by the total activity is the computation of ______.

$30 per machine hour

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

False

Traditional cost systems tend to undercost standard products and overcost specialty products.

True

Traditional systems undercost specialty products that tend to consume more overhead.

ignores other significant causes of overhead may result in selling products at a loss may result in overcharging customers for products

Using direct-labor hours or another volume based cost driver to assign overhead ______.

may lead to overpriced or underpriced goods

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

overcosts; undercosts

Usually, traditional costing Blank______ high-volume products and Blank______ low-volume products.

True

When using activity rates, overhead is assigned the same way as when using plantwide or departmental rates.