Chapter 4: Activity-Based Costing Systems

Question 1

Activity-Based Costing System

Answer 1

It is a costing method that first assigns costs to activities and then to goods and services based on how much each good or service uses the activities.

Question 2

Steps used to determine the cost of goods and services using ABC

Answer 2

1- Identify and classify the activities related to the company’s products.
2- Estimate the cost of activities identified in step 1.
3- Calculate a cost-driver rate for each activity.
4- Assign activity costs to products.

Question 3

Five level hierarchy of Resources and Activities

Answer 3

1- Unit-level Resources and Activities
2- Batch-level resources and activities
3- Product-level resources and activities
4-Customer-Level resources and activities
5 facility-level resources and activities

Question 4

Unit-Level resources and Activities

Answer 4

Are resources acquired and activities performed specifically for individual units of products or service. (material, parts, and components, and perhaps labor and energy resources if they are acquired for each unit of output)

Question 5

Batch-Level resources and activities

Answer 5

the resources acquired and the activities performed to make a group, or batch, of similar products.

Question 6

Product-level resources and activities

Answer 6

are the resources acquired and the activities performed to produce and sell a specific good or service.

Question 7

Customer-level resources and activities

Answer 7

Are the resources acquired and the activities performed to serve specific customers.

Question 8

Facility-level resources and activities

Answer 8

Are the resources acquired and the activities performed to provide the general capacity to produce goods and services.

Question 9

Cost-Driver

Answer 9

Is a characteristic of an activity or event that causes that activity or event to cause costs.
= activity cost/ estimated level of activity in the cost driver base.