ACCT 3203 Chapter 5

Potential problems from having an inaccurate costing system include:

1) A difficult time determining which product is most profitable 2) Continually losing competitive bids 3) Increasing sales with decreasing profits

A cost object is:

1) An item of interest 2) An output resulting from the firm's activities

The follow statement is incorrect:

A product-level activity can always be traced to a manufacturing facility

Activity-based costing (ABC) assigns costs to:

Activities and then to cost objects

When developing an ABC system, the work performed to carry out a firm's operations is identified by an:

Activity analysis

The third step in the ABC development process is to:

Assign costs of activities to items of interest, generally called cost objects

Materials handling is an example of a ______-______ activity

Batch-level

A foundational concept of resource consumption accounting is that _____ of the resources available

Capacity

If a plant manager decides to add capacity in expectation of future sales and production, that cost should be:

Charged as a lump sum in the plant's costs

Measured or quantified amounts of ____ _____ are excellent bases for assigning resources costs to activities and the cost of activities to cost objects

Cost driver

The process of assigning resource costs to certain activities, which, in turn, are assigned to other activities before being assigned to the final cost object is known as _________ ABC

Multistage

A volume-based allocation procedure factory overhead costs are first assigned to:

Plant or departmental cost pools

The following is NOT a part of an activity-based two-stage allocation procedure?

Plant or departmental level costs are assigned to cost objects

A limitation of a volume-based costing system is the:

Potential for products to be charged too much or too little overhead

A diagram that identifies each step that is currently involved in making a product or providing a service is known as a _______ map

Process

The analysis of customer revenues and customer cost is the basis of customer ________ analysis

Profitability

Ideally, a firm should choose ______ consumption cost drivers based upon cause-and-effect relationships

Resource

A measure of the frequency and intensity of a demand placed on a resource by an activity is ______ ________ cost driver

Resource consumption

The overcosting/undercosting that can occur when using volume-based product costing is sometimes called:

Cross-subsidization

The process of identifying activities and cost drivers related to servicing customers is:

Customer cost analysis

The net present value of estimated future profits from a customer is:

Customer lifetime value

Sales commissions is a ________ ______-_______ cost

Customer unit-level

Close cooperation among _____ is not required for a successful ABC/M implementation

Customers

The advantages of ABC for use in governmental units is explained in a ________ standard

FASAB

ABC systems are similar to volume-based costing systems because they both link uses of resources to activities and then link activities to cost objects

False

Beneficial discretionary activities are good candidates for elimination

False

Designing a product is a _____ _____-______ activity

High value-added

The following is NOT an expected benefit of an activity-based costing system?

Higher priced products and services

Unit-level activities in an organization:

1) Are volume-based 2) Generally use the same resource and activity consumption drivers

Sustaining activities for an organization include:

1) Building security 2) Regulatory compliance

Facility-level activities in an organization:

1) Cannot be traced to individual units or batches 2) Sustain the business 3) Include plant security

Customer profitability analysis allows managers to:

1) Choose types of after-sales services to provide 2) Shift customers' purchases mix 3) Introduce profitable new products and services 4) Manage customers' cost-to-serve

Under resource consumption accounting:

1) Cost characteristics are inherent to the underlying resource 2) Costs are matched to cost objects when causality exists

Operational ABM can be used to:

1) Enhance asset utilization 2) Enhance operational efficiency

Relevant factors to consider before determining the action appropriate for each customer include:

1) Growth potential of the customer 2) Importance of the customer to the firm 3) Cross-selling potential

Using ABM can help management identify ways to:

1) Increase value to the customer 2) Improve operations 3) Reduce costs

Potential drawbacks to using a volume-based costing system include:

1) Little incentive is provided for managers to control indirect costs 2) Disproportionate assignment of indirect costs 3) Inaccurate product costs

Time-driven activity based costing:

1) Must be modified for activities that are not time driven 2) Relies on the accuracy of time estimates

An activity-based-costing system is likely to help a company develop and execute strategy by providing accurate information about the cost of:

1) Products and services 2) Serving customers 3) Dealing with suppliers

Strategic ABM can be used to:

1) Select the most profitable customers 2) Select appropriate activities for the operation

Volume-based costing is likely to provide inaccurate cost information when:

1) Support activity usage is not proportional to units produced or hours used 2) The firm produces a diverse mix of products

Volume-based costing systems can be a good strategic choice for firms:

1) That offer professional services to clients 2) With a relatively small level of common costs 3) That produces a fairly homogenous set of products

Typical questions ABC project team members typically ask when gathering activity data include:

1) What resources are required to perform the activity? 2) How much time is spent performing an activity? 3) What value does the activity have for the product or cost object?

The following is NOT identified as part of the three-step sequence for developing an activity-based costing system

Identify cost objects

The difference between the available capacity and the planned level of utilization is called _____ capacity

Idle

Time-driven ABC is a direct method of measuring:

Idle capacity

A disadvantage of time-drive-activity based costing is:

It relies on accurate time estimates

An activity that consumes time, resources, or space, but has little impact on meeting customer needs is a ____ _____-_____ activity

Low value-added

Which of the following is NOT a customer service activity?

Product design

The following is NOT a customer-specific activity?

Product processing

Which of the following relies on the concept of attributable cost or only attaching costs to a cost object when causality exists?

Resource consumption accounting

Developing a costing system requires understanding relationships among __________, activities, and products or services

Resources

Labor and supplies are examples of ______ used in performing manufacturing activities

Resources

An activity can be either a single action or a group of several actions

True

Which government entity was identified in the text as an example of one using ABC/M to better understand its cost structure?

U.S. Patent and Trademark Office

The second step in the ABC development process is to:

Use resource consumption drivers to assign resource costs to activities