ACCT 2020 CH. 4

In​ ABC, how is the activity allocation rate​ computed? A. The total estimated activity allocation base is multiplied by the total estimated activity cost pool. B. The total estimated activity allocation base is divided by the total estimated activity cost pool. C. The total estimated activity cost pool is divided by the total estimated activity allocation base. D. You take the total estimated activity allocation base and subtract the total estimated total activity cost pool.

C

All of the following describe an ABC system except A. ABC systems can create more accurate product costs. B. ABC systems are more complex and costly than traditional costing systems. C. ABC systems are used in both manufacturing and nonmanufacturing companies. D. ABC systems may only be used by service companies.

D

Regarding activity based costing​ systems, which of the following statements is true​? A. ABC systems accumulate overhead costs by departments. B. ABC costing systems are less complex​ and, therefore, less costly than traditional systems. C. ABC costing systems can be used in manufacturing firms only. D. ABC costing systems have separate indirect cost allocation rates for each activity.

D

The first step in developing an ABC system is A. calculate an activity cost allocation rate for each activity. B. allocate the costs to the cost object using the activity cost allocation rates. C. select an allocation base for each activity. D. identify the primary activities and estimate a total cost pool for each.

D

An example of an appraisal cost is the cost of automating the production process. True/False

False

Inspection of incoming raw materials and production loss caused by downtime are examples of prevention costs. True/False

False

Lean thinking involves carrying large amounts of inventory​ "just in​ case" something goes wrong. True/False

False

One key element of lean production is to produce large batches. True/False

False

An example of a prevention cost is the cost of redesigning the product to reduce its complexity. True/False

True

Appraisal costs are incurred to detect poor−quality goods or services. True/False

True

As compared to traditional volumeminus−based costing using a single plantwide overhead​ rate, activityminus−based costing​ (ABC) is a more refined costing system that reduces cost distortion. True/False

True

Batch−level activities and costs are incurred again each time a batch is produced. True/False

True

External failure costs occur when poorminus−quality goods or services are not detected until after delivery to customers. True/False

True

External failure costs occur when the company detects and corrects poorminus−quality goods or services after delivery to customers. True/False

True

It is easier to allocate indirect costs to the products that actually caused those costs if an ABC system is used rather than a traditional costing system. True/False

True

Lean companies typically cross−train employees to perform more than one task. True/False

True

Product testing is an appraisal cost. True/False

True

The cost of training employees would be classified as a prevention cost. True/False

True

Two main benefits of ABC are​ (1) more accurate product cost information and​ (2) more detailed information on the costs of activities and the drivers of those costs. True/False

True

Unit−level activities and costs are incurred for every single unit. True/False

True

Waste can be reduced by implementing shorter setup times. True/False

True