Final Exam Review Ch. 7 AC Managerial

Which of the following is NOT an organizational sustaining cost?

Set-up labor wages

A characteristic essential for successful implementation of ABC is:

a link to how people are evaluated and rewarded

setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of __-level activities.

batch

A systematic approach to identifying the activities that need the most improvement is called

benchmarking

When managers allocate organization-sustaining and unused capacity costs to products:

costs will be overstated incorrect decisions may be made

Which of the following might be included in a customer relations cost pool?

customer entertainment cost of sales calls

Activities that could be combined into one batch-level activity are the number of:

customer orders shipped orders

The most common management reports using ABC data are:

customer profitability product profitability

In activity-based costing, what costs are not assigned to products?

Unused capacity Organization-sustaining

Cost assigned and/or traced when computing product margin in a traditional cost system are:

direct material manufacturing overhead direct labor

In the 19th and 20th centuries, cost systems relied on allocation bases such as:

labor hours machine hours

Costs that are totally unaffected by which products are made during a period are _____ costs.

organization-sustaining

usually, traditional costing __ high-volume products and __ low-volume products

overcosts; undercosts

In activity-based costing, first-stage allocation assigns _____ costs to activity cost pools.

overhead

designing and advertising a product are all __-level activities

product

The most appropriate activity measure for a cost pool consisting of equipment depreciation and power to run machines is

machine hours

Place the steps for implementing ABC in order.

1. define activities, activity cost pools, and activity measure. 2. assign overhead costs to activity cost pools. 3. calculate activity rate 4. assign overhead costs to cost objects 5. prepare management reports.

Which costing system assigns nonmanufacturing overhead on a cause-end-effect basis?

ABC

What are some of the limitations of activity-based costing systems?

ABC procedures produce numbers that do not match traditional costing. Managers and employees may resist the change to ABC. ABC requires substantial resouces

The first major step when implementing an ABC system is:

Identify the activities

The term ____ ____ is also used when referring to an allocation base or activity measure in activity-based costing.

cost driver

An activity-based costing system:

requires substantial resources is costly to maintain produces different numbers than a traditional system

Costs that can be easily traced to individual products include:

sales commission warranty repair costs shipping costs

activity rates are used to apply overhead costs to products and customers in the __-stage allocation.

second

An example of a duration driver is the:

time spent preparing invoices

All manufacturing costs are allocated to products in a(n) ______ costing system, regardless of whether the product consumes the resources associated with those costs.

traditional

All manufacturing costs are assigned to products in ____ costing.

traditional

Simple counts of the number of times an activity occurs are _____ drivers.

transaction

power to run production equipment would be a(n) __-level activity.

unit

Costs such as factory supplies and power to run machines could be combined in a cost pool based on the number of:

units produced

Total cost of each activity divided by the total activity is the computation of:

activity rates

Some manufacturing costs may be excluded from product costs when using:

activity-based costing

overhead includes both manufacturing and non manufacturing costs under:

activity-based costing

An activity measure in a(n) ______ base in an activity-based costing system.

allocation

In activity-based costing, the consumption of overhead resources is caused by:

an activity

Identifying the activities that will form the foundation for the system:

often involving interview employees involves a great deal of judgement can be time-consuming

The amount of time required to perform an activity is measured by a(n) _____ driver.

duration

Activity-based management is focused on:

eliminating waste reducing defects

Which of the following can be combined in activity-based costing?

highly correlated activities

What causes traditional and activity-based costing systems to report different product margins?

The ABC system assigns nonmanufacturing overhead costs to products on a cause-and-effect basis as appropriate. Traditional cost system allocate all of the manufacturing overhead costs to products using a volume-related allocation base. Traditional cost systems allocate all manufactuing overhead costs to products.

Types of costs that might be included in a cost pool based on order size include:

factory supplies equipment depreciation

True or False: In an activity-based costing system, it is best to combine activities that are not highly correlated.

false

In activity-based costing, _____ allocation is the process of assigning overhead costs to activity cost pools.

first-stage

Customer-level activities include:

mailing catalogs sales calls

Under activity-based costing, nonmanufacturing costs:

may be allocated to products based on cause

Activity-based costing uses more cost _____ than traditional costing.

pools

Administrating parts inventory is a(n) ____ activity.

product-level

Unit-level activities are:

proportional to the number of units produced

The first major step in implementing ABC is to identity the _____ that will form the foundation for the system.

activities

In ABC, any event that causes consumption of overhead resources is a(n) _______.

activity

In activity-based costing, each cost pool accumulates costs that relate to a single ____ measures ABC system.

activity

Organization-sustaining activities include:

Preparing annual reports Setting up a computer network Heating a factory

A "bucket" in which costs are accumulated that relate to a single activity measure in the ABC system is a(n) _____.

activity cost pool