ACCT Chapter 4 & 6

Regarding activity-minus−based costing​ systems, which of the following statements is true​? A. ABC costing systems have separate indirect cost allocation rates for each activity. B. ABC systems accumulate overhead costs by departments. C. ABC costing systems are less complex​ and, therefore, less costly than traditional systems. D. ABC costing systems can be used in manufacturing firms only.

ABC costing systems have separate indirect cost allocation rates for each activity.

All of the following describe an ABC system except A. ABC systems may only be used by service companies. B. ABC systems are more complex and costly than traditional costing systems. C. ABC systems are used in both manufacturing and nonmanufacturing companies. D. ABC systems can create more accurate product costs.

ABC systems may only be used by service companies.

Which method are managers using when they use their judgment to classify costs as​ variable, fixed, or​ mixed? A. Low−high method B. High−low method C. Regression analysis D. Account analysis

Account analysis

When preparing a​ scatterplot, how should the data be​ graphed? A. Volume data on the yminus−axis B. Volume data on the zminus−axis C. Cost data on the yminus−axis D. Cost data on the xminus−axis

Cost data on the y−axis

An example of an appraisal cost is the cost of automating the production process. True False

False

Inspection of incoming raw materials and production loss caused by downtime are examples of prevention costs. True False

False

When using the high−low ​method, the slope of the mixed cost line is fixed cost per unit. True False

False

Which of the following is​ true? A. Fixed cost per unit increases when volume increases. B. Total fixed costs increase when volume increases. C. Total fixed costs decrease when volume increases. D. Fixed cost per unit decreases when volume increases.

Fixed cost per unit decreases when volume increases.

The first step in developing an ABC system is A. identify the primary activities and estimate a total cost pool for each. B. calculate an activity cost allocation rate for each activity. C. select an allocation base for each activity. D. allocate the costs to the cost object using the activity cost allocation rates.

Identify the primary activities and estimate a total cost pool for each.

Which of the following is true regarding variable​ costing? A. It treats variable MOH costs as period​ costs, rather than as product costs. B. It is allowed by GAAP for external reporting purposes. C. It treats fixed MOH costs as period​ costs, rather than as product costs. D. It is allowed by the IRS for tax preparation.

It treats fixed MOH costs as period​ costs, rather than as product costs.

Using account​ analysis, what type of cost is an electric bill that charges a flat monthly fee plus a charge for each kilowatt hour of electricity​ used? A. Step B. Fixed C. Mixed D. Variable

Mixed

In​ ABC, how is the activity allocation rate​ computed? A. The total estimated activity allocation base is multiplied by the total estimated activity cost pool. B. The total estimated activity cost pool is divided by the total estimated activity allocation base. C. You take the total estimated activity allocation base and subtract the total estimated total activity cost pool. D. The total estimated activity allocation base is divided by the total estimated activity cost pool.

The total estimated activity cost pool is divided by the total estimated activity allocation base.

An example of a prevention cost is the cost of redesigning the product to reduce its complexity. True False

True

Appraisal costs are incurred to detect poor−quality goods or services. True False

True

As compared to traditional volumeminus−based costing using a single plantwide overhead​ rate, activityminus−based costing​ (ABC) is a more refined costing system that reduces cost distortion. True False

True

Batch−level activities and costs are incurred again each time a batch is produced. True False

True

External failure costs occur when poor−quality goods or services are not detected until after delivery to customers. True False

True

External failure costs occur when the company detects and corrects poor−quality goods or services after delivery to customers. True False

True

It is easier to allocate indirect costs to the products that actually caused those costs if an ABC system is used rather than a traditional costing system. True False

True

Product testing is an appraisal cost. True False

True

The cost of training employees would be classified as a prevention cost. True False

True

The high−low method uses only two of the historical data points to estimate a cost equation. True False

True

Total variable costs change in direct proportion to changes in volume. True False

True

Two main benefits of ABC are​ (1) more accurate product cost information and​ (2) more detailed information on the costs of activities and the drivers of those costs. True False

True

Unit−level activities and costs are incurred for every single unit. True False

True

The data points with the​ ________ should be selected for use in calculating the variable cost per unit and the total fixed costs when using the high−low method. A. highest cost and the lowest cost B. highest volume and the lowest cost C. highest cost and the lowest volume Your answer is not correct. D. highest volume and the lowest volume

highest volume and the lowest volume

When using the high−low ​method, the variable cost per unit can be found as A. run over rise. B. rise over run. C. change in volume over change in cost. D. vertical intercept.

rise over run