9/16 Chapter 4

Question 1

ABC costing

Answer 1

new concept

Question 2

activity measure

Answer 2

measures each activity cost

Question 3

cost driver

Answer 3

causal relationship

Question 4

examples of activity measures

Answer 4

unit level activity, batch level activity, product level activity, organization sustaining activity, customer level activity

Question 5

activity based costing

Answer 5

is more accurate in costing, but it is more costly. It should tell you something you don’t already know because it is costly

Question 6

first stage separation

Answer 6

order size - batch level, customer orders - , product design, customer relations, other

Question 7

estimated costs scale

Answer 7

too high the pricing is not competitive

too low the pricing is too high

Question 8

ABC for external reports doesn’t use it

Answer 8

1. external reports are less detailed
2. difficult to make changes
3. ABC does not conform to GAAP
4. Auditors may be suspect of the subjective allocation of materials

Question 9

ABC Limitations

Answer 9

1. substantial resources required to implement and maintain.
2. Desire to fully allocate all costs to products
3. resistance to unfamiliar numbers and reports
4. Potential misinterpretation of unfamiliar numbers
5. does not conform to GAAP. Two costing systems may be needed

Question 10

benchmarking

Answer 10

a complimentary approach to kaizen costing and activity based management
uses best practices to evaluate and improve activity performance