Chapter 7 Learn Smart
activity cost pool
A "bucket" in which costs are accumulated that relate to a single activity measure in an activity-based costing system.
Batch-level activities
Activities that are performed each time a batch of goods is handled or processed, regardless of how many units are in the batch. The amount of resource consumed depends on the number of batches run rather than on the number of units in the batch.
Product-level activities
Activities that relate to specific products that must be carried out regardless of how many units are produced and sold or batches run.
In ABC each cost pool accumulates costs that relate to a single ________ measure in the ABC system
Activity
activity measure
An allocation base in an activity-based costing system
duration drivers
a measure of the amount of time required to perform an activity
transaction driver
a simple count of the number of times an activity occurs
Activity-based costing (ABC)
a technique to assign product costs based on links between activities that drive costs and the production of specific products
Organization-sustaining activities
activities that are carried out regardless of which customers are served, which products are produced, how many batches are run, or how many units are made
Customer-level activities
activities that are carried out to support customers, but that are not related to any specific product
Unit-level activities
activities that are performed each time a unit is produced
In ABC any event that causes consumption of OH resources is an
activity
a bucket in which costs are accumulated that relate to a single activity measure in ABC system
activity cost pool
what type of activity is preformed each time a group of units is prodcued regaurdless of how many units are in the group
batch level
Customoer orders are considered to be a
batch level activity
a cost pool including costs to entertain clients and make sales calls is a
customer level activity
the most common management reports using ABC data are
customer profitability product profitability
an activity cost pool accumulates costs for ______ activity measures
exactly one
in ABC _____ allocation is the process of assigning OH costs to activity cost pools
first stage
external reports are ____ detailed than internal reports
less
the most appropriate actvity measure fr a cost pool consisting of equipment depreciation an poweer to run machines is
machine hours
usually, traditional costing __ high-volume products and __ low-volume products
overcosts undercosts
abc treats org-sustain costs as
period expenses
as theh number of activities increase the cost to implement an ABC system also increase
true
what level of activity is preformed each time an item of a product is produced
unit level
in ABC the consumption of OH resources is caused by
an activity
Activity
an event that causes the consumption of overhead resources in an organization
activity based costing uses numerous
OH cost pools
carried out regaurdless of which customers are severed, products produced
Org- sustain
An activity base costing system
-May exclude some manufactoring costs from product costs -uses numerous OH cost pools
ABC does not conform to GAAP bc
-excludes some manufactoring costs -includes some manufactoring costs
the amount of time required to preform an activity is measured by a
duration driver
An ABC system usually ____ a traditional cost system
Supplements
in traditional costing ________ costs are assigned to products
Manufactoring
if some products are overcosted and some are under costed the errors will
offset eachother in a COGS and inventory valuations
administrating parts inventory is a _____ activity
product level
activity rates are used to apply OH costs to products and customers in the
second stage allocation
to reconcile ABC product margin to net income
subtrat OH costs not assigned to products
