ACC 213 Chapter 7 learnsmart

Total estimated manufacturing overhead is $900,000 and total estimated activity is 30,000 machine-hours. The plant-wide overhead rate is _____________ per machine hour.

$30

What is the total amount of indirect factory wages if the amount allocated to product design was $200,000 and product design consumes 40% of indirect factory wages?

$500,000

In a traditional cost accounting system, what type of costs are assigned to products even if the costs are not caused by the products?

Manufacturing

In traditional costing, _________ costs are assigned to products

Manufacturing

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

Shipped orders Customer orders

In activity-based costing another term for activity measure is:

cost driver

ABC does not conform to GAAP because it:

includes some non-manufacturing costs Excludes some manufacturing costs

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

incorrect decisions may be made costs will be overstated

The most common management reports using ABC data are:

product profitability customer profitability

When making decisions using ABC data:

unavoidable fixed costs should be ignored

Power to run production equipment would be a(n) ______________-level activity.

unit

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

ABC requires substantial resources managers and employees may resist the change to ABC ABC procedures produce numbers that do not match traditional costing

Compared to traditional systems, activity-based costing uses _______ cost pools and unique measures of activity

More

Activity-based costing only charges products for the cost of the capacity used because:

Products are only assigned the costs of resources they actually use it results in a more stable unit product cost

Which of the following is not essential for the successful implementation of an ABC system?

Top managers must design the ABC system

Which costing method assigns only manufacturing costs to products?

Traditional absorption costing

What level of activity is performed each time an item of a product is produced?

Unit-level

A(n) _______ cost system assigns costs of unused or idle capacity to products.

absorption

The first major step in implementing ABC is to identify the ________ that will form the foundation for the system

activities

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

an activity

In activity-based costing an activity measure is:

an allocation base

ABC is not used for external reporting because ___________ would not be comfortable using allocations based on employee interviews

auditors

customer orders are considered to be a(n) ______ - level activity

batch

a cost pool including costs to entertain clients and make sales calls is a(n) __________ activity

customer-level

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

direct labor direct material manufacturing overhead

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

An activity-based costing system:

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

External reports are ________ (more/less) detailed than internal reports

less

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

machine hours

The greater number of activities in an ABC system, the (more/less) _________ costly it is for the company to develop

more

compared to traditional systems, activity-based costing uses ___________ cost pools and unique measures of activity

more

an example of a transaction driver is the:

number of bills sent out to a customer

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

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

Activities that occur regardless of which customers are served, which products are produced, or how many batches are run or units made are facility-level or ___________-_____________ activities.

organization-sustaining

What type of activities are carried out regardless of which customers are served, which products are produced, how many batches are run or how many units are produced?

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

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

pools

Activities such as research and development that are not dependent on the number of units or batches are ________-level activities

product

Unit-level activities are:

proportional to the number of units produced

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

second

A reason that activity-based costing is not often used for external reporting is:

the BC system may not conform to GAAP

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

total costs net operating income total sales

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

which costing system does not assign selling and administrative costs to products when computing product margin?

traditional

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

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

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

units produced

Costs that can be easily traced to individual products include:

warranty repair costs shipping costs sales commission

Costs that can be easily traced to individual products include:

warranty repair costs shipping costs sales commission

Activity based costing provides managers with information that affects:

both fixed and variable costs

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

$1700

A company's products had sales of $750,000 and total costs of $360,000. If the net operating income for the company was $215,000, total overhead costs not assigned to products was $175,000.

$175,000

Some manufacturing costs may be excluded from product cost when using ABC

True

The activity rate for the customer orders activity pool is $20 per order. If there are 400 customer orders for a product, the total overhead cost assigned to this product for customer orders is ___________

$8000

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 ____________.

$875

Place the steps for implementing ABC in order

1. Define activities, activity cost pools, and activity measures 2. assign overhead costs to activity cost pools 3. calculate activity rates 4. assign overhead costs to cost objects 5. prepare management reports

What type of activities are performed each time a group of units is processed, regardless of how many units are in the group?

Batch-level