Accounting 306 - Chapter 9

A factor that causes, or "drives," an activity's costs is called a(n)

cost drivers

A modified version that addresses the costs of maintaining an ABC system is called

time driven

A single cost pool is used to allocate overhead costs to products for all departments using the..............allocation method

traditional

Given the following information, assign overhead costs to Product A using ABC. A. $186,250 B. $175,300 C. $205,150

A

Given the following information, compute the cost driver rate for setup costs. A. $3,000 per setup B. $500 per setup C. $5,000 per setup D. $7,500 per setup

A

The best cost driver is one that A. is causally related to the cost being allocated B. will result in the fewest costs being allocated C. will result in the most costs being allocated D. is rarely associated with an activity

A

The first step in activity-based costing is to A. identify the activities B. assign costs using activity-based costing C. compute the cost driver rates D. identify the cost drivers

A

When low-volume products require more machine setups, overhead should be allocated based on A. complexity B. direct labor-hours C. number of units D. volume

A

Which of the following is a facility-related cost? A. Plant depreciation B. Setup C. Machine repair D. Compliance

A

In the plantwide allocation method, A. the cost pool is the entire plant B. one overhead allocation rate, or set of rates, is used to allocate overhead for all departments C. each department across the plant has a unique overhead allocation rate D. all costs are allocated to the plant and not the individual departments

A and B

Which of the following are problems with identifying users of ABC? A. ABC means different things to different organizations. B. Organizations may not use ABC throughout their organization. C. Organizations will announce the discontinuance of ABC.

A and B

Which of the following are true of activity-based costing? A. In the ABC two-stage cost system, the first stage consists of activities. B. With activity-based costing, there is a single cost pool representing the entire plant. C. With activity-based costing, each activity has an associated cost pool. D. In the ABC two-stage cost system, the first stage consists of departments.

A and C

Time equations A. can be written if there is a maximum size of an order B. does not use estimates C. requires that all orders take the same amount of time to go through any one of the activities D. allow managers to adjust the times for orders with different characteristics

A and D

Which of the following are true? A. If the company manufactures products that are quite similar and that use the same set of resources, the plantwide rate is probably sufficient. B. If multiple products use the manufacturing facilities in many different ways, a plantwide rate is ideal. C. Managers need to choose between plantwide and departmental rates based on the costs and benefits of each. D. The choice of whether to use a plantwide rate or departmental rates depends on the products and the production process.

A, C, and D

Which of the following statements are true? A. Companies are not likely to announce they have discontinued the use of ABC. B. It is generally easy to identify companies that use ABC. C. ABC means different things to different observers. D. ABC may be applied to parts of an organization but not everywhere.

A, C, and D

Activity-based costing can be applied to administrative activities to compute the cost of A. selling a product to a customer B. performing an administrative service C. direct administrative labor

B

If a company is concerned about the cost of maintaining an ABC system, they can consider a modified version called A. departmental activity-based costing B. time-driven activity-based costing C. plantwide activity-based costing D. product-driven activity-based costing

B

Overhead rates based on machine-hours are calculated as A. actual overhead costs divided by actual machine-hours B. budgeted overhead costs divided by budgeted machine-hours C. budgeted overhead costs divided by actual machine-hours D. actual overhead costs divided by budgeted machine-hours

B

Examples of batch related activities include A. regulatory compliance costs B. setup costs C. material handling D. machine repair

B and C

Which of the following are true regarding activity-based costing? A. Activity-based costing provides less detailed measures of costs than do plantwide or department allocation methods. B. Activity-based costing requires more recordkeeping. C. Activity-based costing requires teamwork. D. Activity-based costing recognizes that all overhead is directly related to the volume of output.

B and C

In the plantwide allocation method, A. each department across the plant has a unique overhead allocation rate B. the cost pool is the entire plant C. all costs are allocated to the plant and not the individual departments D. one overhead allocation rate, or set of rates, is used to allocate overhead for all departments

B and D

Time-driven activity-based costing requires the A. time it takes to complete surveys or interviews of multiple managers B. time it takes to complete the various activities of the department C. revenues earned by a department D. cost of the resources supplied to a department

B and D

Which of the following are true of activity-based costing? A. Activity-based costing uses a single cost pool for the entire plant. B. Activity-based costing is a two-stage product costing method. C. Activity-based costing is a single-stage product costing method. D. Activity-based costing is based on the concept that products consume activities and activities consume resources.

B and D

Activity-based costing A. requires less recordkeeping that traditional costing systems B. provides more detailed information than plantwide and two-stage allocation C. helps managers identify cost drivers that were previously unknown D. requires teamwork between accounting and nonaccounting employees E. provides the same cost estimates as plantwide and two-stage allocation

B, C, and D

Activity-based costing______ be applied to administrative activities. A. should not B. is required to C. can D. cannot

C

Given the following information, assign overhead costs to Product B using ABC. A. $150,750 B. $125,250 C. $138,750

C

Given the following information, compute the cost driver rate for assembling costs. A. $133 per machine-hour B. $667 per machine-hour C. $250 per machine-hour D. $400 per machine-hour

C

Identifying the activities is the______ step in developing an ABC system. A. third B. final C. first D. second

C

The formula for calculating a cost driver rate is A. estimated indirect cost + estimated volume of allocation base B. estimated indirect cost × estimated volume of allocation base C. estimated indirect cost ÷ estimated volume of allocation base D. estimated indirect cost - estimated volume of allocation base

C

The second step in activity-based costing is to A. assign costs using activity-based costing B. identify the activities C. identify the cost drivers D. compute the cost driver rates

C

Time-driven activity-based costing______ the need to conduct surveys or interviews of multiple managers and employees. A. increases B. mandates C. avoids

C

Which of the following is true? A. Low-volume products "subsidize" high-volume products when overhead is applied based on volume. B. High-volume products should always have overhead allocated using volume-based methods. C. Low-volume, complex products require more machine-setups. D. High-volume products always require more direct labor-hours per unit.

C

Which of the following statements is false regarding cost drivers? A. The best cost driver is one that is causally related to the cost being allocated. B. In activity-based costing, the selection of a cost driver is often easier because a measure of the activity volume can be used. C. Finding a cost driver that is causally related to the cost being allocated is always possible.

C

The choice of whether to use a plantwide rate or departmental rates depends on A. revenue goals of the company B. types of allocation drivers to be used C. the costs and benefits of information provided by each system D. the products and the production process

C and D

Identifying the cost drivers is the______ step in developing an ABC system. A. final B. third C. first D. second

D

TDABC A. cannot be adjusted for orders of different sizes B. always assumes all orders go through an activity in the same amount of time C. cannot be used in conjunction with traditional ABC costing D. uses time equations to allow for differences among orders

D

Costs are assigned to individual cost objects (products or services) using appropriate cost allocation bases, or Costs are assigned to individual cost objects (products or services) using appropriate cost allocation bases, or

cost driver

The vicious cycle of attempting to cover a fixed amount of costs with fewer and fewer units until the firm is producing no units is known as the

death spiral