CHAPTHER 5

A measure of frequency and intensity of demands placed on activities by cost objects is:

An activity consumption cost driver.

Which of the following is a benefit of activity-based costing?

Facilitate better product pricing decisions.

Activity-based costing (ABC) differs from other costing approaches in that it more accurately measures the cost of activities that are

Not proportional to the volume of outputs produced.

Which of the following is a batch-level cost driver?

Number of materials handling transactions.

Which of the following is a batch-level cost driver?

Number of orders.

Which of the following is most likely to be the cost driver for the packaging and shipping activity?

Number of orders.

In regard to selling activities, which one of the following would not be a cost driver for selling expense?

Number of production runs.

Which of the following would likely be the most appropriate cost driver to allocate machine set-up costs to products?

Number of production runs.

A volume-based rate is an appropriate overhead application base when:

Only one product is manufactured.

Overhead costs are allocated to cost objects in an activity-based costing system in the following manner:

Overhead costs are traced to activities, then costs are traced to products.

Which of the following would not be considered a facility-level activity?

Placing purchase orders.

Which of the following activities is a facility-level activity?

Plant maintenance.

Which of the following activities is a facility-level activity?

Plant management salaries.

All of the following are low-value-added activities except:

Processing.

Which one of the following is a high value-added activity?

Processing.

An activity that is performed to support the production of a new custom-order product is a:

Product-level activity.

Engineering change orders, maintenance of equipment used in manufacturing, and product design costs are examples of:

Product-level costs.

Which one of the following is not a unit-level cost driver?

Production orders.

If a costing system uses a single base to allocate overhead costs that are results of several production activities:

Products that use relatively more of this base tend to be overcosted.

The major limitation of volume-based costing systems is the use of volume-based

Rates.

The general sales manager's salary is an example of a:

Sales-sustaining cost.

General corporate sales expenditures are:

Sales-sustaining costs.

Which of the following is an example of a high-value-added activity?

Shipping the customer's order.

Successful activity-based costing (ABC) implementation depends upon the firm

Starting with a relatively simple system.

Effective implementation of activity-based costing (ABC) requires

Support of top management and key employees.

Elimination of low-value-added activities in a firm should

Not affect customer value.

A measure of the quantity of resources consumed by an activity is

A resource consumption cost driver.

Volume-based overhead rates may cause undesirable strategic effects such as

A. Incorrect decisions. B. Unprofitable cross-subsidization of products. C. Ineffective management of operations for process improvement. D. All of these answer choices are correct.

Which one of the following is not a recommendation for a successful implementation of ABC/M?

A. Obtain support of management and personnel. B. Complete an activity analysis. C. Start with a relatively simple system. D. Use ABC/M on a job that will succeed. E. All of these answer choices are features of successful ABC/M implementations.

Which of the following is not true regarding activity-based costing (ABC) systems?

ABC identifies more costs as indirect costs than do traditional volume-based systems.

The examination of the efficiency of each of a firm's activities

Activity analysis.

In an activity-based costing system, overhead costs are divided into separate:

Activity cost pools.

The management of activities to improve the value received by the customer and the competitiveness of the organization is:

Activity-based management.

Procurement costs such as costs of placing orders for materials and paying suppliers are usually classified as:

Batch-level costs.

Purchase order, set-up, and inspection costs are examples of:

Batch-level costs.

Volume-based rates produce inaccurate product cost when

Both a lack of volume-based overhead and there is a large range of products.

Invoicing cost is an example of a:

Customer batch-level cost.

Processing sales returns and allowances is usually classified as a:

Customer batch-level cost.

Freight charges based on number of units shipped to customers is a:

Customer unit-level cost.

The cost of sales visits is a:

Customer-sustaining cost.

The cost to process monthly statements is an example of a:

Customer-sustaining cost.

Which of the following is not considered a benefit of activity-based costing?

Decreased production activity levels.

The costs of operating a regional warehouse is an example of a:

Distribution-channel cost.

The use of activity-based costing is most appropriate for:

Firms that manufacture multiple product lines.

Activity-based costing systems:

Have separate overhead rates for each activity.

Which of the following is not normally associated with activity-based costing?

High direct labor costs relative to manufacturing overhead costs.

Which of the following would be the most appropriate cost driver to allocate factory electricity costs to products?

Machine hours.

Which of the following activity cost pools would most likely be allocated based on the number of production runs?

Machinery set-up costs.

Activity-based costing for manufacturing operations is used to assign:

Manufacturing overhead costs to products.

In performing activity analysis during the design of an activity-based costing (ABC) system, the management accountant studies

The resources, activities, and cost drivers in the operation.

Using a volume-based overhead rate based on machine hours to assign manufacturing overhead to a product line that uses relatively few machine hours is likely to:

Underapply overhead to the product line.

A company using a volume-based overhead assignment (allocation) method will tend to:

Understate the cost of low volume products.

An activity that is performed for each unit of production is a(n):

Unit-level activity.

In an organization that makes furniture, which of the following is a high value-added activity?

Using direct materials in production.

If the usage of project activities is not proportional to the number of units produced, then some managers will be overcharged and others undercharged under the

Volume-based costing

Costs at the unit-level of activity should be allocated to products using cost drivers that are:

Volume-related.

When gathering activity data, which of the following would not be a question that ABC project team members typically ask employees or managers?

Where the activity takes place