Ch 4 Smart Book
What level of activity is performed each time an item of a product is produced?
Unit-level
A company assigns overhead using a plantwide rate. If total estimated manufacturing overhead is $900,000 and the total estimated activity is 30,000 machine-hours, the overhead cost assigned to a product using 12,000 machine-hours is ______. Multiple choice question. $2,250,000 $450,000 $360,000 $900,000
$360,000 Reason: ($900,000 ÷ 30,000) × 12,000 = $360,000
A predetermined overhead rate in an activity-based costing system is called a(n) __________ __________ .
Blank 1: activity Blank 2: rate
Activities that occur regardless of how many products are produced or how many batches or units manufactured are level activities.
Blank 1: organization, facility, or facilities
An activity that must be done for each item produced is a(n). _______ - _______ activity.
Blank 1: unit Blank 2: level
True or false: Traditional cost systems tend to undercost standard products and overcost specialty products. True false question.TrueFalse
False
In ABC, any event that causes consumption of overhead resources is a(n).
activity
Setting up machines, billing customers, and performing tests at a lab are all examples of a(n) ______. activity measure activity cost pool direct labor
activity
Total cost of each activity divided by the total activity is the computation of ______. Multiple choice question. activity rates transaction drivers allocation bases cost pools
activity rates
A cost bucket in which costs related to a particular activity measure are accumulated is called a(n) ______. Multiple choice question. activity cost pool activity activity rate activity measure
activity cost pool
Costs at the batch level depend on the number of ______. Multiple choice question. batches processed units sold units produced products in a batch
batches processed
Costs at the batch level depend on the number of ______. Multiple choice question. products in a batch units produced batches processed units sold
batches processed
Customer orders are considered to be a(n) ______-level activity. Multiple choice question. batch facility unit product
batch
Activity based costing provides managers with information that affects:
both fixed and variable costs
Costs that cannot be traced on a cause-and-effect basis to individual products are ______ -levelcosts. Multiple choice question. batch unit facility
facility
Using direct-labor hours or another volume based cost driver to assign overhead ______. Multiple select question. can badly distort labor and material costs may result in selling products at a loss may result in overcharging customers for products ignores other significant causes of overhead
may result in selling products at a loss may result in overcharging customers for products ignores other significant causes of overhead
Total estimated manufacturing overhead is $900,000 and total estimated activity is 30,000 machine-hours. The plantwide overhead rate is $ per machine hour.
Blank 1: 30
Activity-based costing ______. Multiple choice question. excludes direct labor from product costs computes product costs in the same way as traditional costing only considers manufacturing overhead when computing product costs always leads to higher product costs than traditional costing
computes product costs in the same way as traditional costing
When two variables move together, they are said to be negatively correlated. True false question.TrueFalse
false
Power to run production equipment would be a(n) _____-level activity.
Unit
In activity-based costing, nonmanufacturing and manufacturing costs are assigned to products on a(n) ______ basis.
cause-and-effect
A company incurred the following: Total manufacturing costs of $500,000, total production department costs of $300,000, and total production order costs of $275,000. It used a total of 50,000 direct labour hours and 100,000 machine hours, and 2,750 production orders were placed. Use activity-based costing to calculate the activity rate for production orders. Multiple choice question. $10 $3 $0.01 $100
100 Reason: $275,000 ÷ 2,750 = $100 per production order
Given direct material cost of $10, direct labor cost of $15, direct-labor based overhead of $12 and Activity-Based Costing overhead of $16, the total cost of the product using Activity-Based costing is $
41
Usually, traditional costing ______ high-volume products and ______ low-volume products. Multiple choice question.
overcosts; undercosts
An activity that must be done for each item produced is a(n) __ level activity. Multiple choice question. product unit batch facility
unit
Customer-level activities include:
mailing catalogs sales calls
Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine set ups. The activity rate is $ per setup.
500
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 $.
7800
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
In activity-based costing, what is calculated by dividing the total cost of each activity by its total cost driver? Multiple choice question. Cost pool Predetermined overhead rate Allocation base Activity rate Transaction driver
Activity rate
In activity-based costing, what is calculated by dividing the total cost of each activity by its total cost driver? Multiple choice question. Predetermined overhead rate Transaction driver Activity rate Allocation base Cost pool
Activity rate
Select all that apply Which of the following are facility-level activities? Multiple select question. Paying factory insurance Property taxes on plant Arranging for shipping products to a customer Setting up factory equipment
Paying factory insurance Property taxes on plant
How much of an activity is carried out is expressed by a(n) ______, which is used as the allocation base for applying overhead costs to products and services. Multiple choice question. activity rate activity cost pool activity-based costing system activity measure
activity measure
When a company has extensive product diversity and complex overhead, it is best to assign overhead using ______. Multiple choice question. a single plant-wide overhead rate departmental overhead rates activity-based costing
activity-based costing
An activity measure in activity-based costing is used as a(n) base for applying overhead costs to products and services.
allocation
A predetermined overhead rate in an activity-based costing system is called ______. Multiple choice question. activity-based management an activity cost pool an activity rate an activity
an activity rate
In activity-based costing an activity measure is ______. Multiple choice question. a measure of material costs another name for a predetermined overhead rate a pool of labor costs an allocation base
an allocation base
In activity-based costing an activity measure is ______. Multiple choice question. a pool of labor costs a measure of material costs an allocation base another name for a predetermined overhead rate
an allocation base
Setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of _______ -level activities.
batch
Organization-sustaining activities include:
heating a factory preparing annual reports setting up a computer network
Using direct-labor hours or another volume based cost driver to assign overhead ______. Multiple select question. can badly distort labor and material costs ignores other significant causes of overhead may result in overcharging customers for products may result in selling products at a loss
ignores other significant causes of overhead may result in overcharging customers for products may result in selling products at a loss
Activity-based costing improves the accuracy of product costs by ______. Multiple select question. increasing the number of cost pools used to accumulate overhead cost using cost pools that are more homogeneous than departmental cost pools using a variety of activity measures to assign overhead costs to products highlighting the activities that could benefit the most from improvement initiatives
increasing the number of cost pools used to accumulate overhead cost using cost pools that are more homogeneous than departmental cost pools using a variety of activity measures to assign overhead costs to products
Using volume-based cost drivers to assign overhead when ABC is appropriate ______. Multiple choice question.
may lead to overpriced or underpriced goods
Using volume-based cost drivers to assign overhead when ABC is appropriate ______. Multiple choice question. will not affect the total price of goods will always result in goods being underpriced will always result in goods being overpriced may lead to overpriced or underpriced goods
may lead to overpriced or underpriced goods
The cost of implementing and maintaining an activity-based costing system ______ the benefits received. Multiple choice question. will always be higher than may outweigh will always be less than
may outweigh
A significant limitation of the ABC model is that the product costs computed will most likely be ______. Multiple choice question. understated for purposes of decision making overstated for purposes of decision making less accurate than those computed using a conventional system
overstated for purposes of decision making
Select all that apply When cost systems were developed in the 1800's, most companies ______. Multiple select question. a. believed there was little correlation between labor hours and overhead b. produced a small number of similar products c. assigned overhead based on machine hours d. focused on simplicity
produced a small number of similar products focused on simplicity
Activities such as research and development that are not dependent on the number of units or batches are __-level activities.
product
Designing and advertising a good are both ______-level activities. Multiple choice question. facility batch product unit
product
Research & development is a(n) ______ - level activity.
product
Research & development is a(n) _______ - level activity
product
A company assigns overhead using a plantwide rate. If total estimated manufacturing overhead is $900,000 and the total estimated activity is 30,000 machine-hours, the overhead cost assigned to a product using 12,000 machine-hours is ______. Multiple choice question. $2,250,000 $360,000 $450,000 $900,000
$360,000
Moving from plantwide to departmental overhead rates tends to correct most of the product distortions that can occur with a plantwide system. True false question. TrueFalse
False
When using activity rates, overhead is assigned the same way as when using plantwide or departmental rates. True false question. TrueFalse
true
Activity-cost rates may either be computed per product or per activity.
False
Activity-based costing ______. Multiple choice question. excludes direct labor from product costs only considers manufacturing overhead when computing product costs computes product costs in the same way as traditional costing always leads to higher product costs than traditional costing
computes product costs in the same way as traditional costing
An activity cost pool accumulates costs for ______ activity measure(s). Multiple choice question. exactly one multiple one or more
exactly one
Costs that cannot be traced on a cause-and-effect basis to individual products are ______ -level costs. Multiple choice question. facility batch unit
facility
What type of activities are performed each time a group of units is processed, regardless of how many units are in the group? Multiple choice question. Unit-level Facility-level Product-level Batch-level
Batch-level
Activity-based costing ____ include activities that do not relate to the number of units produced.
May
A plantwide overhead rate based on direct labor hours is ______ appropriate. Multiple choice question. sometimes never always
sometimes
Organization-sustaining activities is another term for ______ -level activities.
Blank 1: facility
Select all that apply Which of the following statements are true? Multiple select question. Product diversity increases the chance of overhead costs that are unrelated to direct labor. Most companies throughout the world have moved away from using direct labor hours or machine hours to allocate overhead. Technology has made more complex product systems less expensive to develop and maintain. On an economywide basis, direct labor and overhead costs are generally moving in opposite directions.
Product diversity increases the chance of overhead costs that are unrelated to direct labor. Technology has made more complex product systems less expensive to develop and maintain. On an economy-wide basis, direct labor and overhead costs are generally moving in opposite directions.
The activity rate is computed by dividing the ______ by the ______. Multiple choice question. total departmental overhead cost; total activity level per department total manufacturing cost; total activity level total cost in the activity cost pool; activity level in the activity cost pool
total cost in the activity cost pool; activity level in the activity cost pool