Chapter 5

Customers

Close cooperation among __________ is NOT required for a successful ABC/M implementation

Low-value

Customer satisfaction decreases imperceptibly or remains unchanged if a(n) __________ __________ added activity is eliminated

Sustain the business; Cannot be traced to individual units or batches; and Include plant security

Facility-level activities in an organization:

An item of interest; and an output resulting from the firm's activities

A cost object is:

Process map

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

Cost driver

A factor that causes or relates to a change in the cost of an activity is a(n) what?

Capacity

A foundational concept of resource consumption accounting is that __________ is a function of the resources available

Resource Consumption

A measure of the frequency and intensity of a demand placed on a resource by an activity is a(n) __________ __________ cost driver

Activity

A specific task, action, or unit of work done is called what?

Resource

A(n) economic element needed or consumed in performing activities is called a(n) what?

Activities and then to cost objects

Activity-based costing (ABC) assigns costs to what?

Activities and then to cost objects

Activity-based costing (ABC) assigns costs to:

Measure of demand placed on resources by final cost objects

An activity consumption cost driver is a(n)

Low value-added

An activity that consume time, resources, or space, but has little impact on meeting customer needs is a(n) __________ activity

Dealing with Suppliers; Products and Services; and Serving Customers

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

Idle

Capacity that is available for use by other business units in the firm to expand their operations or to lease to other organizations is known as __________ capacity

Resources

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

Resource consumption accounting (RCA)

Dynamic, fully integrated, principle-based, and comprehensive management accounting approach?

Resource

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

Plant or departmental cost pools

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

Allows them to become familiar with ABC/M

Involving management and employees:

Avoids overwhelming users and holds costs down

Keeping the ABC/M design simple:

resources

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

Cost Driver

Measured or quantified amounts of __________ __________ are excellent bases for assigning resource costs to activities and the cost of activities to cost objects

Customer-sustaining

Monthly statement processing is a __________ cost

distribution channel

Operating costs of a regional warehouse is a __________ cost

Enhance Asset utilization and Enhance operational efficiency; Improve operations; Increase value to the customer; and Reduce costs

Operational ABM can be used to:

Little incentive is provided for managers to control indirect costs; Inaccurate product costs; and Disproportionate assignment of indirect costs

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

Resource Consumption accounting

Relies on the concept of attributable cost or only attaching costs to a cost object when causality exists

Increasing sales with decreasing profits; continually losing competitive bids and a difficult time determining which product is more profitable

Risks of inaccurate cost information

High value-added

Something that significantly increases the value of a product or service to a customer is called a(n) __________ activity

High-value-added

Something that significantly increases the value of a product or service to a customer is called a(n) __________ activity

Regulatory compliance; Building Security

Sustaining activities for an organization include:

FASAB

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

Profitability

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

Lifetime

The net present value of estimated future from a customer for a specified time is the customer __________ value

cross-subsidization

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

Multistage ABC

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:

Time-driven activity based costing

The process that assigns resource costs directly to cost objects using the cost per time unit of supplying the resource is:

Use resource consumption drivers to assign resource costs to activities

The second step in the ABC development process is to:

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

The third step in the ABC development process is to:

Idle capacity

Time-driven ABC is a direct method of measuring:

Relies on the accuracy of time estimates; and Must be modified for activities that are not time driven

Time-driven based costing:

False

True or False: Activity-based costing assigns overhead to products based on resources consumed per unit produced

False

True or false: A product-level activity can always be traced to a manufacturing facility

False

True or false: ABC and ABM are common in the for-profit sector but rarely used in not-for-profits and government organizations

False

True or false: 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

True

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

False

True or false: Beneficial discretionary activities are good candidates for elimination

Are volume-based: and Generally use the same resource and activity consumption drivers

Unit-level activities in an organization:

Show how and why the process works

Using ABC/M on a job that will succeed:

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

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

That produces a fairly homogeneous set of products; With a relatively small level of common costs; and That offer professional services to clients

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

With a relatively small level of common costs; That produces a fairly homogeneous set of products; and That offer professional services to clients

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

Activity costs are assigned to cost objects using activity consumption cost drivers; Direct materials and labor are assigned to cost objects; and Overhead costs are assigned to activities using resource consumption cost drivers

What is a part of an activity-based two-stage allocation procedure?

Most overhead costs relate directly to final products or services

What is correct?

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

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