Cost Accounting - Chapter 9

Study online at quizlet.com/_6puv4y

1. Activity Any discrete task that an 13. Death Spiral Process that begins by attempting to
organization undertakes to increase price to meet reported
make or deliver a product product costs, losing market,
or service reporting still higher costs, and so
on, until the firm is out of business
2. Activity-base Costing (ABC) A two-stage product costing
method that assigns costs 14. Department company has a separate cost pool
first to activities and then to Allocation Method for each department; allocation
the products based on each method that has a separate cost
product's use of activities pool for each department, which
has its own overhead allocation rate
3. Activity-based costing Recordkeeping
or set of rates
provides more information
about product costs but 15. The final step in the Activity Costs
requires more __________ due to activity based cost
the number of cost drivers. system is to assign
the __________ to
4. Any discrete task that an activity
products.
organization undertakes to
make or deliver a product or 16. The first step of the Activities
service is called an _______. ABC System is that it
allocates costs to
5. Assuming that 4 employees 403,200
____________, not
work 48 weeks each year,
departments.
and 35 hours out of a 40 hour How to solve:
work week, the minutes of 17. In an ABC two step cost pool
capacity available equals.... 48 weeks 35 hours/week 60 cost system, each
min/hour * 4 employees = activity has an
403,200 associated _________.
6. The choice of whether to use Products and Production 18. In the plantwide the entire plant
a plantwide rate or Process allocation method,
departmental rates depends the cost pool is....
on what?
19. Plantwide Allocation Single-step
7. Classification of cost drivers cost hierarchy is a ___________
into general levels of activity approach to
such as volume or batch is allocating overhead
called... costs.
8. Cost Driver Factor that causes or drivers 20. Plantwide Allocation the cost pool is the entire plant;
costs Method allocation method using one cost
pool for the entire plant. It uses one
9. Cost Driver Rate Formula Cost of Receiving/Minutes
overhead allocation rate, or one set
Available
of rates, for all of a plant's
10. Cost Hierarchy classifies cost drivers by departments
general dimensions or
21. Predetermined Rate Estimated Indirect Cost/Estimated
levels of activity
Formula Volume of Allocation Base
11. __________ costing is based on Activity-Based
22. The second step of Cost Drivers
the concept that products
the two step cost
consume activities and
allocation process
activities consume resources.
identifies:
12. Costs are assigned to Bases or Drivers
23. True or false: the True. A company must determine
individual cost objects
decision to drop a how much cost will be saved if it
(products or services) using
product should be drops a product.
appropriate cost allocation
based on the impact
_________ or _______.
it has on reported
product costs.
24. True or False: With an ABC system, the True
selection of an allocation base, or cost
driver, is often easier because we can
use a measure of the activity volume.
25. What are the four steps of Activity- 1. Identify the activities—such as processing orders—that consume resources and assign
based Costing? costs to them.

2. Identify the cost driver(s) associated with each activity. A cost driver causes, or
"drives," an activity's costs. For the order-processing activity, the cost driver could be the
number of orders.

3. Compute a cost rate per cost driver unit or transaction. The cost driver rate could be
the cost per order, for example.

4. Assign costs to products by multiplying the cost driver rate by the volume of cost
driver units consumed by the product. For example, the cost per order multiplied by the
number of orders processed for a particular song during the month of March measures
the cost of the order processing activity for that song during March.
26. When a company uses only one rate to Variable
allocate overhead costs, the accounting
system treats all overhead as if the costs
were __________.
27. Which method uses one overhead Plantwide Allocation Method
allocation rate, or one set of rates, to
allocate overhead to products for ALL
departments in a particular plant?