ACCT 2020 - Chapter 4 - Smart Book Practice
Activity-based management focuses on Blank______. Multiple select question. increasing processing time increasing efficiency pricing decisions improving operations
increasing efficiency improving operations
Direct labor hours and machine hours are both examples of ______________-based cost drivers.
volume
Direct labor hours and machine hours are both examples of ____________________ -based cost drivers.
volume
A method that attempts to assign overhead costs based on what is required to produce products is Blank______ costing. Multiple choice question. target activity-based volume-based traditional
activity-based
Improving operations and reducing costs are most likely to be involved in Blank______ management. Multiple choice question. just-in-time sustainability total quality activity-based
activity-based
Activity-based costing systems typically include ______ cost drivers. Multiple choice question. only non-volume-based only labor- and machine-related both volume- and non-volume-based only volume-based
both volume- and non-volume-based
Implementing an ABC system Blank______. Multiple choice question. -is critical for every company that has overhead costs -is easier than implementing a volume-based costing system -always provides better cost information -provides information for cost management
provides information for cost management
Implementing an ABC system Blank______. Multiple choice question. always provides better cost information is critical for every company that has overhead costs is easier than implementing a volume-based costing system provides information for cost management
provides information for cost management
Implementing an ABC system Blank______. Multiple choice question. is critical for every company that has overhead costs always provides better cost information provides information for cost management is easier than implementing a volume-based costing system
provides information for cost management
Under activity-based costing, a degree program at a university is considered a(n) _____________ -level activity.
service or product
Under activity-based costing, a degree program at a university is considered a(n) ______________ -level activity.
service or product
A company assigns overhead based on direct labor costs. The predetermined overhead rate is $3.00 per direct labor dollar. A job that used a total of 20 direct labor hours ($400 in total direct labor costs) would be assigned __________________ in total overhead.
$1,200; $3.00( $3.00*20)
Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour. Multiple choice question. $25.00 $78.12 $62.50 $19.53
$19.53: $625,000/(8,000*4)
Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour. Multiple choice question. $19.53 $78.12 $62.50 $25.00
$19.53; $625,000/8,000=$78.125/4= $19.53
Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours? Multiple choice question. $252 $280 $1,260 $56
$280; Predetermined overhead rate = $35,000/5,000 or $7 per direct labor hour × 40 hours = $280.
Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product. Multiple choice question. $118,000 to Model XLT and $118,000 to Model TXT $73,160 to Model XLT and $44,840 to Model TXT $70,800 to Model XLT and $47,200 to Model TXT $59,000 to Model XLT and $59,000 to Model TXT
$73,160 to Model XLT and $44,840 to Model TXT
A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and total activity of 20,000 development hours. The activity rates are Blank______. Multiple choice question. $20 per customer call and $25 per development hour $8 per customer call and $15 per development hour $11.11 per customer call or per development hour
$8 per customer call and $15 per development hour
Facility-level activities
- Facility-level activities are performed to sustain facility capacity as a whole and are not caused by any specific product
Volume-based cost drivers
-Number of units produced -Number of direct labor hours -Number of machine hours -Total direct materials cost
Select all that apply Which of the following statements are true? Multiple select question. Quality training is an example of a prevention cost. Most experts believe that incurring prevention costs is the most effective way to manage quality costs. Prevention costs are incurred to identify defective products before they get to the customer. Prevention costs are usually too expensive and should be avoided by most companies.
-Quality training is an example of a prevention cost. -Most experts believe that incurring prevention costs is the most effective way to manage quality costs.
SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $_____________________ .
2 or two; $500,000/250,000
Anders Inc. assigns overhead using activity proportions and has a machine setup cost pool. Last year there were 27,500 setups at a total cost of $550,000. Product R3D used a total of 8,250 of those setups and should be assigned ________ % of the total setup cost.
30%
Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine setups. The activity rate is $____________ per setup.
500
The percentage of the total cost driver that is attributable to each product line is called a(n) __________ __________.
Activity Proportion
In activity-based costing, what is calculated by dividing the total cost of each activity by its total cost driver? Multiple choice question. Predetermined overhead rate Transaction driver Allocation base Activity rate Cost pool
Activity rate
A technique that attempts to assign overhead costs to products based on the actions they require is called ____________ - ____________ costing.
Activity- Based costing
Which of the following statements is true? Multiple choice question. ABC is only suitable for providing detailed cost information. An existing ABC system can report sustainability-related information. In order to provide sustainability information, any current ABC system would have to be redesigned.
An existing ABC system can report sustainability-related information.
Which of the following statements are true? Multiple select question. Before implementing ABC, a company should weigh the benefits against the costs. Better cost measurement is the true benefit of ABC. Given today's technology, implementing ABC is an easy task. The support of upper management is required for successful ABC implementation.
Before implementing ABC, a company should weigh the benefits against the costs. The support of upper management is required for successful ABC implementation.
A group of similar activities that have been combined together is called an activity ____________ ____________.
Cost pool
What types of activities are carried out regardless of which products are produced, how many batches are run, or how many units are produced? Multiple choice question. Batch-level Product-level Facility-level Unit-level
Facility-level
What types of activities are carried out regardless of which products are produced, how many batches are run, or how many units are produced? Multiple choice question. Facility-level Product-level Batch-level Unit-level
Facility-level
True or false: ABC is designed to provide managers with detailed information about the cost of activities and is therefore not useful in providing sustainability-related information. True/False
False
True or false: The best reason to implement an ABC system is to obtain more accurate information about the cost of products and services.
False
True or false: The best reason to implement an ABC system is to obtain more accurate information about the cost of products and services. True false question. TrueFalse
False
Which of the following statements are true? Multiple select question. Implementing an ABC system has little, if any, impact on employees (other than accountants). Implementing an ABC system is not a trivial task. The benefit of more accurate information is always worth the cost. Managing and reducing costs is the true benefit of ABC.
Implementing an ABC system is not a trivial task. Managing and reducing costs is the true benefit of ABC.
In order to make good product introduction decisions in today's digital age, managers need to be able to accurately estimate Blank______. Multiple choice question. activity rates life cycle costs benchmarks target costs
Life Cycle Costs
Which of the following is NOT a volume-based cost driver? Multiple choice question. Direct labor dollars Sales revenue Direct material costs Machine setups
Machine setups
Which of the following is NOT a volume-based cost driver? Multiple choice question. Sales revenue Direct labor dollars Direct material costs Machine setups
Machine setups
Activity-based costing (ABC)
Method of assigning indirect costs to products or sercices based on the activities they require. 1. allocations 1. Identify and classify activities - can be facility/product/batch/unit-level activities 2. Form activity cost pools and assign indirect costs to each pool. -Group like or similar activities together -Machining and installation (unit level) -Machine setup (batch level) -Engineering and quality control (product level) - an ABC system should include at least one activity cost pool that captures non-init-level activities, such as batch-level, or facility-level activities. - three cost pools are overhead/indirect materials/indirect labor 2. allocations 3. Select a cost driver for each activity cost pool. Volume-Based Cost Drivers number of units produced number of direct labor hours Number of machine hours Total direct materials cost Non-Volume-Based Cost Drivers Number of batched or setup time Processing time per unit Number of Quality inspections Number of Design Changes 4. Assign indirect costs to products or servivces based on their activity demands. Can be done using activity rate method or Activity proportion method Activity Rate Method - A rate used to assign indirect costs to products and services in activity-based costing. -Computed by dividing total activity cost by total activity driver. Activity Proportion Method - A percentage used to assign indirect costs to products and services in activity-based costing. -Computed by dividing the activity cost driver for each product or service by the total activity cost driver.
Which of the following statements are true? Multiple select question. Prevention costs are incurred to identify defective products before they get to the customer. Most experts believe that incurring prevention costs is the most effective way to manage quality costs. Prevention costs are usually too expensive and should be avoided by most companies. Quality training is an example of a prevention cost.
Most experts believe that incurring prevention costs is the most effective way to manage quality costs. Quality training is an example of a prevention cost.
Batch-level costs are assigned using: Volume-based cost drivers Non-volume-based cost drivers Cost pools Departmental rates
Non-volume-based cost drivers
Which of the following are facility-level activities? Multiple select question. -Paying factory insurance -Setting up factory equipment -Human resource hiring fairs -Arranging for shipping products to a customer
Paying factory insurance Human resource hiring fairs
Activity Proportion Method
Product Cost Driver / Total Cost Driver cost driver for each product/total cost driver for all products
Which of the following statements are true? Multiple select question. Prevention costs are usually too expensive and should be avoided by most companies. Quality training is an example of a prevention cost. Most experts believe that incurring prevention costs is the most effective way to manage quality costs. Prevention costs are incurred to identify defective products before they get to the customer.
Quality training is an example of a prevention cost. Most experts believe that incurring prevention costs is the most effective way to manage quality costs.
A bakery creates a new type of cake for sale. Under activity-based costing, this is an example of a Blank______-level activity. Multiple choice question. customer service group facility
Service
A bakery creates a new type of cake for sale. Under activity-based costing, this is an example of a Blank______-level activity. Multiple choice question. service group customer facility
Service
The approach to determine what costs should be in order to earn an acceptable profit across a product's life cycle is called __________ ____________ or cost planning.
Target Costing
Which of the following statements are true? Multiple select question. -The support of upper management is required for successful ABC implementation. -Given today's technology, implementing ABC is an easy task. -Before implementing ABC, a company should weigh the benefits against the costs. -Better cost measurement is the true benefit of ABC.
The support of upper management is required for successful ABC implementation. Before implementing ABC, a company should weigh the benefits against the costs.
Activity Rate Method
Total Activity Cost / Total Cost Driver 1. Total cost in pool / Total Cost Driver = Activity Rate 2. Activity Rate x Cost driver used by whatever you are allocating to = Cost to Allocate
An approach that aims to improve products by reducing and eliminating errors, streamlining activities, and continuously making production processes better is called ___________ ____________ management
Total Quality
True or false: When computing unit costs, the direct materials and direct labor costs are the same, regardless of whether ABC or a volume-based costing system is used.
True
True or false: When computing unit costs, the direct materials and direct labor costs are the same, regardless of whether ABC or a volume-based costing system is used. True false question.TrueFalse
True
A method that attempts to assign overhead costs based on what is required to produce products is Blank______ costing. Multiple choice question. activity-based target traditional volume-based
activity-based
The linked set of activities required to design, produce, and deliver products and provide aftermarket service to customers is called the _________ _________.
Value Chain
The linked set of activities required to design, produce, and deliver products and provide aftermarket service to customers is called the __________ ___________.
Value Chain
To ensure that activities deliver what matters to customers, the concept of the __________ __________ begins with the customer and works backward.
Value Chain
To ensure that activities deliver what matters to customers, the concept of the begins with the customer and works backward.
Value Chain
A technique that attempts to assign overhead costs to products based on the actions they require is called ___________ - ____________ costing.
activity - based
A technique that attempts to assign overhead costs to products based on the actions they require is called _______________ - ________________ costing.
activity ; based
The percentage of the total cost driver that is attributable to each product line is called a(n) _____________ ______________.
activity proportion
A predetermined overhead rate in an activity-based costing system is called a(n) _____________ _____________ .
activity rate
Activity Based Costing
allocation of overhead to specific jobs based on their percentage of activities A method of allocating overhead based on each product's use of activities in making the product. a technique to assign product costs based on links between activities that drive costs and the production of specific products
Non-volume-based cost drivers ______. Multiple select question. are used in traditional costing systems allow more indirect costs to be allocated to products are related to the number of units produced or customers served are used in ABC systems
allow more indirect costs to be allocated to products are used in ABC systems
Indirect costs Blank______. Multiple choice question. are also called activity costs are not easily traced to products or services are only related to manufacturing activities must be assigned using volume-based cost systems
are not easily traced to products or services
Non-volume-based cost drivers ______. Multiple select question. are used in traditional costing systems are used in ABC systems allow more indirect costs to be allocated to products are related to the number of units produced or customers served
are used in ABC systems allow more indirect costs to be allocated to products
The final step in activity-based costing is Blank______. Multiple choice question. identifying and classifying activities selecting cost drivers for each activity cost pool assigning indirect costs to products or services assigning indirect costs to each activity cost pool
assigning indirect costs to products or services
At a minimum, an ABC system should have ______. Multiple choice question. at least four activity cost pools—one for each type of activity one unit-level activity cost pool at least one non-unit-level activity cost pool
at least one non-unit-level activity cost pool
At a minimum, an ABC system should have ______. Multiple choice question. at least one non-unit-level activity cost pool one unit-level activity cost pool at least four activity cost pools—one for each type of activity
at least one non-unit-level activity cost pool
The formula to compute activity proportion is Blank______. Multiple choice question. cost driver for product ×× cost driver for all products cost driver for all products ÷÷ cost driver for each product cost driver for product ÷÷ cost driver for all products total activity cost ÷÷ total cost driver
cost driver for product / cost driver for all products
A group of similar activities that have been combined together is an activity Blank______. Multiple choice question. rate measure cost pool
cost pool
Activities that occur regardless of how many products are produced or how many batches are run or units made are ____________ - ____________ activities.
facility - level
A just-in-time (JIT) system Blank______. Multiple select question. is a demand-pull system is used to help reduce costs generally uses more suppliers than a traditional system pushes products through the manufacturing process
is a demand-pull system is used to help reduce costs
A system that pulls materials and products through the manufacturing system based on customer demand is called Blank______. Multiple choice question. just-in-time total quality management benchmarking activity-based costing
just-in-time
The duration of a product from its infancy through its eventual decline is represented by the product _____________ ____________ .
life cycle
To calculate manufacturing overhead cost per unit using ABC, divide the total Blank______. Multiple choice question. unit-level manufacturing overhead by the number of units sold and exclude batch-, product-, and facility-level costs manufacturing overhead cost by the number of units sold manufacturing overhead cost by the number of units produced unit-level manufacturing overhead by the number of units produced and exclude batch-, product-, and facility-level costs
manufacturing overhead cost by the number of units produced
Indirect costs are also referred to as _______________ costs.
overhead
To keep quality problems from happening in the first place, companies incur ____________ costs.
prevention
To keep quality problems from happening in the first place, companies incur _______________ costs.
prevention
To keep quality problems from happening in the first place, companies incur___________ costs.
prevention
A proactive approach managers use to determine what costs should be is called Blank______. Multiple choice question. life cycle cost management activity-based costing benchmarking target costing
target costing
Indirect costs can be assigned to products or services using Blank______. Multiple select question. the activity proportion method the activity rate method target costing activity-based management total quality management
the activity proportion method the activity rate method
Indirect costs can be assigned to products or services using Blank______. Multiple select question. the activity rate method total quality management the activity proportion method activity-based management target costing
the activity rate method the activity proportion method
A management system that focuses on continually improving production processes is called Blank______. Multiple choice question. life cycle cost management total quality management activity-based management just-in-time
total quality management
