BADM SmartBook 5

To calculate total unit cost in an activity based system requires

- direct material per unit - overhead activity cost per unit - direct labor per unit

Volume-based product-costing systems have difficulty assigning overhead costs accurately if

- products differ significantly in the way they use activities - there is a large proportion of non-unit-level activities

Product costs can be distorted by using ______.

- the same cost driver for all activities - single cost pool - only unit level cost drivers

The classification of activities into levels is called a(n) .

Cost Hierarchy

Activities required in order for the entire production process to occur are referred to as level activities.

Facility

True or false: The classification of activities into unit-level, batch-level, product-sustaining-level and facility-level activities is called activity based costing

False

True or false: The total unit product cost is calculated by adding total direct materials and total direct labor costs and dividing by the number of units produced.

False

Assignment of overhead costs to activity cost pools occurs in stage of ABC costing.

Stage 1 or one

Traditional product-costing systems distort product costs by using ______.

a single, volume=based cost driver

A system that uses multiple cost pools and assigns costs to products in accordance with the amount of the activity used by the product line is a(n) costing system.

activity-based

Direct labor is not the best cost driver for a cost related to the purchasing raw materials because the purchasing activity is a(n)

batch activity and direct labor is a unit-level activity

One way to identify differences between products is to compare the _______ ratio of each activity cost pool used by the products.

consumption

The proportion of an activity consumed by a particular product is called the .

consumption ratio

a characteristic of an event or activity that results in the incurrence of costs is a cost ____

cost driver

A pool rate of $3.00 per machine hour means that ______

each machine hour used by a product should cost $3.00

Costs such as heating and cooling, property taxes and insurance on the factory are examples of

facility-level activities

factors influencing the movement from traditional to ABC costing include all of the following except _____

high reliance on labor to produce products

With a traditional volume-based costing system, there is a tendency to undercost product

high-volume, complex

with a traditional volume based costing system, there is a tendency to undercost...

high-volume, complex product

The steps in stage two of ABC costing are _____

identification of cost drivers for each activity cost pool computation of total unit activity cost for each product line

The steps in stage one of ABC costing are ____

identification of cost pools assignment of costs to appropriate cost pool

The second stage in an ABC system is to ______.

identify the cost driver for each activity cost pool

An important factor in the move toward ABC system is

increasing automation makes information more available

Costs of setting up machinery for a new production run ______.

is a batch-level activity

With a traditional volume-based costing system, there is a tendency to undercost ______.

low-volume, complex

One factor driving the movement toward ABC is

more product diversity

The cost per unit of the cost driver for a particular activity cost pool is called the .

pool rate

Activities that are necessary to support entire product lines, but are not performed every time a new unit or batch is produced are

product,sustaining

Engineering design cost is an example of a(n) ______ level activity.

product-sustaining

Increasing automation, coupled with sophisticated real-time information systems, ______.

provides the data needed to implement highly accurate product costing systems

The degree of correlation is the

relationship between the consumption of an activity and the consumption of the cost driver

the relationship between the consumption of an activity and the consumption of the cost driver

the degree of correlation

Volume-based costing is also called - based costing

throughput

Identification of cost drivers for each activity cost pool occurs in stage of ABC costing.

two or 2

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

unit

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

unit level

Product costs are most likely to be distorted when using a(n) -based product costing system.

volume

Labor-hour-based product-costing systems where labor hour are related closely to the factory volume are also called

volume-based throughput-based