ACCT 311 Ch.

9
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1. ... Activity-based costing system 10. Answer: $138,750 Given the following information,
recognizes that overhead is not Reason: assign overhead costs to Product B
necessarily related to the ____________ of 200,000 (300/800) + using ABC.
output. 75,000 (15/25) + 50,000
(15/40)
2. 2 Given budgeted overhead cost of
Activity
$250,000 and budgeted machine-
Costs
hours of 125,000, the overhead rate is
Cost Driver
$______ per machine-hour.
Assembling costs
3. 62.5% of direct If budgeted overhead cost is $250,000 $200,000
labor cost and budgeted direct labor cost is Machine-hours
$400,000 then the overhead rate Setup costs
equals: $75,000
4. ABC means Select all that apply Number of setups
different things to Which of the following statements are Inspecting costs
different observers. true? $50,000
Direct-labor hours
Companies are not
likely to announce
they have Activity
discontinued the Product A Use
use of ABC. Product B Use
Assembling costs
ABC may be 500 machine hours
applied to parts of 300 machine hours
an organization but Setup costs
not everywhere. 10 setups
15 setups
5. ABC means Select all that apply
Inspecting costs
different things to Which of the following are problems
25 direct labor hours
different with identifying users of ABC?
15 direct labor hours
organizations

Organizations may
not use ABC
throughout their
organization
6. activity-based The two-stage product costing method
costing that assigns costs first to activities and
then to the products based on each
product's use of activities is called ______.
7. Activity-Based The method that first assigns costs to
Costing (ABC) activities and then assigns them to
products based on the product's
consumption of activities is _______-_______
_______ .
8. activity - based Analyzing processes to uncover
management nonvalue-added steps that can be
eliminated is a component of __________-
___________ ___________.
9. activity costs The final step in the activity-based
costing system is to assign the ________
________ to products.
11. Answer: Given the following information, assign 16. benefits When choosing to use more complex
$186,250 overhead costs to Product A using ABC. allocation methods, the incremental costs
Reason: of additional information must be justified
200,000 by an increase ______ in from the improved
(500/800) + Activity decisions
75,000 (10/25) + Costs
17. can Activity-based costing ______ be applied to
50,000 (25/40) Cost Driver
administrative activities.
Assembling costs
$200,000 18. complexity When low-volume products require more
Machine-hours machine setups, overhead should be
Setup costs allocated based on ______.
$75,000 19. consider time- If a company is concerned about the cost
Number of setups driven activity- of maintaining an ABC system, they should
Inspecting costs based costing ______.
$50,000
20. cost driver The cause of an activity cost is called a(n)
Direct-labor hours
_______ _______
21. cost driver The best ______ _______ is one that is causally
related to the cost being allocated.
Activity 22. cost of the Select all that apply
Product A Use resources Time-driven activity-based costing requires
Product B Use supplied to a the ______
Assembling costs department
500 machine hours
300 machine hours time it takes to
Setup costs complete the
10 setups various
15 setups activities of the
Inspecting costs department
25 direct labor hours
15 direct labor hours 23. Cost Pool In an ABC two-stage cost system, each
Multiple choice question. activity has an associated ________ _________.
$205,150 24. cost pools The major difference between department
$175,300 or allocation and plantwide allocation is the
$186,250 cost activites number of ________ ________used to allocate
12. Answer: Assuming that 4 employees work 48 weeks overhead costs.
403,200 each year, and 35 hours out of a 40 hour 25. Death Spiral The process that begins by attempting to
Reason: week, the minutes of capacity available increase price to meet reported product
48 weeks x 35 equals ______. costs, losing market, reporting higher
hours/wk x 60 costs, and so on until out if business is the
min/hr x 4 _______ ___________.
employees
26. Death spiral The process where a company attempts to
13. are not With TDABC, the managers ______ asked to recover costs by increasing price for a
estimate what proportion of the time the product with decreasing demand describes
employees spend on each activity. the ______ _______
14. avoids Time-driven activity-based costing ______ the 27. Decrease When a company uses one allocation
need to conduct surveys or interviews of base, it gives the appearance that when a
multiple managers and employees. company drops a segment, all overhead
15. bases, drivers Costs are assigned to individual cost costs will (increase/decrease)
objects (products or services) using 28. decrease Automation has caused direct labor costs
appropriate cost allocation _______or_______ in companies to (decrease/increase) _________
29. department When overhead is allocated 41. is less Select all that apply
using the department allocation expensive to TDABC ______.
method, there is one cost pool maintain than
per ______. traditional
ABC
30. department If multiple products use the
manufacturing facilities in many
is based on
different ways, the ________
time
allocation method is the best
estimates for
choice to allocate overhead
different
costs.
activities
31. driver in each product To assign overhead costs to a
42. less As companies have become more
product, multiply the cost driver
automated, including those in the service
rates by the number of units of
sector such as banks, direct labor has
the cost ______.
become _________ (more/less) appropriate as a
32. False True or false: Time-based basis for allocating overhead.
activity-based costing only uses
43. Low-volume, Which of the following is true?
time estimates to allocate costs.
complex
33. False True or false: A death spiral can products
only occur when a company has require more
decreasing demand. machine-
34. False True or false: The cost estimate to setups.
make a product is the same 44. material Examples of batch related activities include
regardless of the cost allocation handling ______.
method used. setup costs
35. Finding a cost driver Which of the following 45. may be worse The product costs produced by an ABC
that is causally related statements is false? than a system ______.
to the cost being traditional
allocated is easier with system in
plantwide allocation. some cases
36. first Identifying the activities is the 46. minutes The cost driver rate per minute for an
______ step in developing an ABC available activity is calculated by dividing the cost of
system. the activity by __________ __________.
37. how much time each With TDABC, the manager is 47. must be Select all that apply
activity takes for a asked to estimate ______. maintained ABC systems ______.
single transaction and updated
38. identify the activities The first step in activity-based
costing is ______. allocate cost
using volume
39. identify the cost drivers The second step in activity-based
and batch
costing is ______.
bases
40. increasing a product's Select all that apply
48. nonvalue - When managers analyze a product's
price when the product Examples of a company
added activities, they often uncover many ______-______
is experiencing a experiencing a death spiral
steps or activities that can be eliminated.
decrease in demand include ______.
49. objects The basic approach in product costing is to
a major customer no allocate costs in the cost pools to individual
longer purchasing a cost ______.
product causing a 50. one cost pool The plantwide allocation method uses ______.
company to increase for the entire
the product's price plant
one rate
51. performing an Activity-based costing can be 62. Variable When a company uses only one rate to allocate
administrative service applied to administrative activities overhead costs, the accounting system treats all
to compute the cost of ______. overhead as if the costs were ______.
52. Plant depreciation Which of the following is a facility- 63. volume Activity-based costing system recognizes that
related cost? overhead is not necessarily related to the _______ of
output
53. plant The term _______ refers to an entire
or factory, store, or hospital. 64. volume Activity-based costing system recognizes that
plantwide overhead is not necessarily related to the ________ of
output.
54. plantwide When a nonmanufacturing
organization uses a single overhead 65. volume Activity-based costing assigns costs to products
rate to allocate indirect costs, it is by multiplying the cost driver rate by the _________ of
called a(n) _______ allocation. cost driver units consumed by the product
55. provides more Select all that apply
detailed information ABC ______.
than plantwide and
two-stage allocation

helps managers
identify cost drivers
that were previously
unknown

requires teamwork
between accounting
and nonaccounting
employees
56. purchase orders Which of the following is NOT a
typical allocation base companies
use when calculating a single
plantwide rate?
57. second Identifying the cost drivers is the
______ step in developing an ABC
system.
58. time - driven A method that addresses the costs
of maintaining an ABC system is
called __________-___________ activity-
based costing
59. time equations A TDABC can be extended to allow
for differences among orders by
using ________ ________.
60. True True or false: When using activity-
based costing, the predetermined
overhead rate applies to any type
of indirect cost.
61. uses time equations to TDABC ______.
allow for differences
amount orders