Ch. 5 Activity-Based Costing & Managing

Because of changes that are occurring in the basic operations of many firms, all of the following represent trends in the way indirect costs are assigned EXCEPT: A. Treating direct labor as an indirect manufacturing cost in an automated factory B. Using throughput time as an application base to increase awareness of the costs associated with lengthened throughput time C. Preferring plant wide application rates that are based on machine hours rather than incurring the cost of detailed cost assignments D. Using several machine cost pools to measure product costs on the basis of time in a machine center

C

Which of the following is true about ABC? A. It should not be used with process or job costing B. It can be used only with process C. It can be used only with job D. It can be used with either job or process

D

Activities, their drivers, and their costs may be classified as unit-level, batch-level, product-level, and facility-level. If ABC info is prepared for internal purposes, which costs are most likely to be treated as period costs?

Facility level

Multiple or departmental MOH rates are considered preferable to a single or planted overhead rate when

Various products are manufactured that do not pass through the same departments or use the same manufacturing techniques

Process value analysis is a key component of activity-based management that links product costing and

continuos improvment

Unlike the traditional full-absorption cost system, ABC assigns

costs to individual projects based on various activities involved

In an ABC system, what should be used to assign a department's manufacturing overhead costs to products produced in varying lot sizes?

multiple cause-and-effect relationships

In ABC, cost reduction is accomplished by identifying and eliminating: All cost drivers Nonvalue- adding activities

no yes

A basic assumption of ABC is that

products or services require the performance of activities, and activities consume resources