Managerial accounting chapter 7

in ABC the greater the number of activities the

*More accurate the costs are likely to be *More costly the system will be to design (More activities make a system more complex)

activities that coild be combines into one batch level activity are the number of

- shipped orders - customer order

A company's products has sales of 750000 and total costs of 360000. If the net operating income for the company was 215000, total overhead costs not assigned to products was

750,000 - 360,000 = 390,000 390,000 - 215,000 = 175,000

which costing system assigns nonmanu overhead on a case and effect basis

ABC

in ABC, Any event that causes insumption of overhead resouces is an

Activity

the most approprate activity for a cost pool consisting of eqipment depreciation and power to run machines is

Machine hours

the first major step in implimenting ABC is to identify the ____ that will form the foundation for the system

activities

In activity base costing, each cost pool accumilates costs that relate to a single ______ measure in the ABC system

activity

activity-based costing uses numerous _____ cost pools

activity

Overhead includes both manufacturing and non manufacturing costs under:

activity-based costing only

customer orders are considered to be an ____ level activity

batch

the term ___ _____ is used when refering to an allocation base or activity measure in activity-based costing.

cost driver

the most common management reports using ABC data are

customer and product profitiability

which of the following statements is true regarding overhead allocation in the 19th and 20th centuries?

direct labor hours was a satisfactory overhead allocation base.

the amount of time required to perform an activity is measured by an ____ driver

duration

in tradional costing, ___ costs are assigned to products

manufacturing

activity based costing __ include activities that do not releate to the number of units produced

may

under activity based costing, nonmanufacturig costs:

may be allocated to products based on cause

what type of activtities are carried out regardless of which customers are served, which products are produced, how many batches are run or how man units are produced

organizing substaining

in activity base costing, first stage allocation assigns ___ costs to activity cost pools

overhead

activity based costing uses more cost _____ than tradional costing

pools

atcitivities such as research and development that are not dependent on the number of units or batches are _____ level activitites

product

in activity based costing, ____ are different from those calculted using tradional costing

product margins

individual customer ____ munis individual customer ___ equals customer margin

sales costs

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

second

which of the folloiwn gis NOT an organization sustaining cost?

set up labor wages

All manufacturing costs are allocated to products in a _____ costing system regardless of whether the product consumers the resources associated with those costs.

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

if the activity rate is $65 per order with a total of 120 orders for a product, the overhead cost assigned to the product is $

65x120=$7800

what causes tradional and activity based costing systems to report different product margins

- the ABC sustem assigns nonmanufacturing overhead costs to product on a cause and effect basis as appropriate - tradionally cost systems allocate all manufacturing overhead costs to products - tradional cost systems allocate all of the manufcturing overhead cost to products using a volume related allocation base

An activity-based costing system :

- uses numerous ovrehead cost pools - may exdlude some manufacturing costs from product costs

Which of the following items are the same under both ABC and traditional costing?

-Net operating income -Total sales -Total assets

costs that can be easility traced to individual products include

-Shipping costs -Sales commission -Warranty repair cost

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

-Unused capacity -Organization sustaining

costs assigned and/or traced when computing product margin in a tradional cost system are

-direct labor - manu overhead - direct materials

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

-equipment depreciation -factory supplies

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.

if the activity rate for the customer order cost pool is $250 per order and the total for this cost pool is $425,000, what is the total number of customer orders?

425000/250 = 1700

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

overcost, undercost

The total cost in the product design cost pool is $200,000 with a total activity of 1,600 designs. The total cost assigned to a customer who had 7 designs done is $______________.

$200,000/1600 = $125 $125*7= $875

A company assigns overhead using a plan wide rate. If total estimated manufacturing overhead is $900,000 and the total activity is 30,000 machine hours, the overhead cost assigned to a product using 12,000 machine hours is:

$360,000 [($900k/30k) x 12K]

The most common management reports using ABC data are

- customer profitability - product profitability

activity based costing only charges products for the cost of the capacity used because

- products are only assigned the cost of resouces they actually use - it results in a more stble unit product cost

Customer-level activities include

- sales calls - mailing catalogs

in activity based costing an actively measure is

an allocation base

the customer orders cost pool uses 25% of indirect factory wages. if total indirect factory wages are 500,000

500000x.25=125000

why is the top management support needed when ABC is implemented?

leadership is instrumental in moticating employees to embrace ABC