ACCT 311 Ch. 9

TDABC ______.

uses time equations to allow for differences amount orders

Activity-based costing assigns costs to products by multiplying the cost driver rate by the _________ of cost driver units consumed by the product

volume

Automation has caused direct labor costs in companies to (decrease/increase) _________

decrease

If multiple products use the manufacturing facilities in many different ways, the ________ allocation method is the best choice to allocate overhead costs.

department

When overhead is allocated using the department allocation method, there is one cost pool per ______.

department

To assign overhead costs to a product, multiply the cost driver rates by the number of units of the cost ______.

driver in each product

True or false: A death spiral can only occur when a company has decreasing demand.

False

True or false: The cost estimate to make a product is the same regardless of the cost allocation method used.

False

Which of the following is a facility-related cost?

Plant depreciation

Analyzing processes to uncover nonvalue-added steps that can be eliminated is a component of __________-___________ ___________.

activity - based management

The final step in the activity-based costing system is to assign the ________ ________ to products.

activity costs

The two-stage product costing method that assigns costs first to activities and then to the products based on each product's use of activities is called ______.

activity-based costing

Activity-based costing ______ be applied to administrative activities.

can

If a company is concerned about the cost of maintaining an ABC system, they should ______.

consider time-driven activity-based costing

Select all that apply Time-driven activity-based costing requires the ______

cost of the resources supplied to a department time it takes to complete the various activities of the department

When a company uses only one rate to allocate overhead costs, the accounting system treats all overhead as if the costs were ______.

Variable

With TDABC, the managers ______ asked to estimate what proportion of the time the employees spend on each activity.

are not

The cause of an activity cost is called a(n) _______ _______

cost driver

The term _______ refers to an entire factory, store, or hospital.

plant or plantwide

Identifying the cost drivers is the ______ step in developing an ABC system.

second

Activity-based costing system recognizes that overhead is not necessarily related to the _______ of output

volume

Which of the following is true?

Low-volume, complex products require more machine-setups.

True or false: When using activity-based costing, the predetermined overhead rate applies to any type of indirect cost.

True

Costs are assigned to individual cost objects (products or services) using appropriate cost allocation _______or_______

bases, drivers

Select all that apply ABC ______.

provides more detailed information than plantwide and two-stage allocation helps managers identify cost drivers that were previously unknown requires teamwork between accounting and nonaccounting employees

The process where a company attempts to recover costs by increasing price for a product with decreasing demand describes the ______ _______

Death spiral

When a company uses one allocation base, it gives the appearance that when a company drops a segment, all overhead costs will (increase/decrease)

Decrease

True or false: Time-based activity-based costing only uses time estimates to allocate costs.

False

Identifying the activities is the ______ step in developing an ABC system.

first

Select all that apply Examples of a company experiencing a death spiral include ______.

increasing a product's price when the product is experiencing a decrease in demand a major customer no longer purchasing a product causing a company to increase the product's price

Select all that apply TDABC ______.

is less expensive to maintain than traditional ABC is based on time estimates for different activities

Examples of batch related activities include ______.

material handling setup costs

In an ABC two-stage cost system, each activity has an associated ________ _________.

Cost Pool

Given budgeted overhead cost of $250,000 and budgeted machine-hours of 125,000, the overhead rate is $______ per machine-hour.

2

If budgeted overhead cost is $250,000 and budgeted direct labor cost is $400,000 then the overhead rate equals:

62.5% of direct labor cost

Select all that apply Which of the following statements are true?

ABC means different things to different observers. Companies are not likely to announce they have discontinued the use of ABC. ABC may be applied to parts of an organization but not everywhere.

Select all that apply Which of the following are problems with identifying users of ABC?

ABC means different things to different organizations Organizations may not use ABC throughout their organization

The method that first assigns costs to activities and then assigns them to products based on the product's consumption of activities is _______-_______ _______ .

Activity-Based Costing (ABC)

Given the following information, assign overhead costs to Product B using ABC. Activity Costs Cost Driver Assembling costs $200,000 Machine-hours Setup costs $75,000 Number of setups Inspecting costs $50,000 Direct-labor hours Activity Product A Use Product B Use Assembling costs 500 machine hours 300 machine hours Setup costs 10 setups 15 setups Inspecting costs 25 direct labor hours 15 direct labor hours

Answer: $138,750 Reason: 200,000 (300/800) + 75,000 (15/25) + 50,000 (15/40)

Given the following information, assign overhead costs to Product A using ABC. Activity Costs Cost Driver Assembling costs $200,000 Machine-hours Setup costs $75,000 Number of setups Inspecting costs $50,000 Direct-labor hours Activity Product A Use Product B Use Assembling costs 500 machine hours 300 machine hours Setup costs 10 setups 15 setups Inspecting costs 25 direct labor hours 15 direct labor hours Multiple choice question. $205,150 $175,300 $186,250

Answer: $186,250 Reason: 200,000 (500/800) + 75,000 (10/25) + 50,000 (25/40)

Assuming that 4 employees work 48 weeks each year, and 35 hours out of a 40 hour week, the minutes of capacity available equals ______.

Answer: 403,200 Reason: 48 weeks x 35 hours/wk x 60 min/hr x 4 employees

The process that begins by attempting to increase price to meet reported product costs, losing market, reporting higher costs, and so on until out if business is the _______ ___________.

Death Spiral

Which of the following statements is false?

Finding a cost driver that is causally related to the cost being allocated is easier with plantwide allocation.

Time-driven activity-based costing ______ the need to conduct surveys or interviews of multiple managers and employees.

avoids

When choosing to use more complex allocation methods, the incremental costs of additional information must be justified by an increase ______ in from the improved decisions

benefits

When low-volume products require more machine setups, overhead should be allocated based on ______.

complexity

The best ______ _______ is one that is causally related to the cost being allocated.

cost driver

The major difference between department allocation and plantwide allocation is the number of ________ ________used to allocate overhead costs.

cost pools or cost activites

With TDABC, the manager is asked to estimate ______.

how much time each activity takes for a single transaction

The first step in activity-based costing is ______.

identify the activities

The second step in activity-based costing is ______.

identify the cost drivers

As companies have become more automated, including those in the service sector such as banks, direct labor has become _________ (more/less) appropriate as a basis for allocating overhead.

less

The product costs produced by an ABC system ______.

may be worse than a traditional system in some cases

The cost driver rate per minute for an activity is calculated by dividing the cost of the activity by __________ __________.

minutes available

Select all that apply ABC systems ______.

must be maintained and updated allocate cost using volume and batch bases

When managers analyze a product's activities, they often uncover many ______-______ steps or activities that can be eliminated.

nonvalue - added

The basic approach in product costing is to allocate costs in the cost pools to individual cost ______.

objects

The plantwide allocation method uses ______.

one cost pool for the entire plant one rate

Activity-based costing can be applied to administrative activities to compute the cost of ______.

performing an administrative service

When a nonmanufacturing organization uses a single overhead rate to allocate indirect costs, it is called a(n) _______ allocation.

plantwide

Which of the following is NOT a typical allocation base companies use when calculating a single plantwide rate?

purchase orders

A method that addresses the costs of maintaining an ABC system is called __________-___________ activity-based costing

time - driven

A TDABC can be extended to allow for differences among orders by using ________ ________.

time equations

Activity-based costing system recognizes that overhead is not necessarily related to the ________ of output.

volume