Chapter 5

Question 1

A cost driver is either a(n) _____ consumption cost driver or a(n) _____ consumption cost driver.

Answer 1

Resource

Activity

Question 2

Name the 3 steps in developing an activity-based costing system.

Answer 2

Identify resource costs and activities
Assign resource costs to activities
Assign activity costs to cost objects

Question 3

Name the 4 levels of activities.

Answer 3

Unit-level
Batch-level
Product-level
Facility-level

Question 4

An economic element needed or consumed to performed activities.

Answer 4

Resource

Question 5

A factor that causes or relates to a change in the total cost of an activity.

Answer 5

Cost Driver

Question 6

A measure of the frequency and intensity of demand placed on a resource by an activity.

Answer 6

Resource Consumption Cost Driver

Question 7

A measure of the demand placed on the resources by products, services, or customer.

Answer 7

Activity Consumption Cost Driver

Question 8

The type of cost driver used to assign resource costs to a particular activity or cost pool.

Answer 8

Resource Consumption

Question 9

The type of cost driver used to assign activity cost pool costs to cost objects.

Answer 9

Activity Consumption

Question 10

A costing approach that assigns resource costs to cost objects based on activities performed for the cost objects.

Answer 10

Activity-Based Costing

Question 11

A procedure that assigns a firm’s resource costs to cost pools and then to cost objects.

Answer 11

Two-Stage Cost Assignment

Question 12

When using volume-based costing, cross-subsidization results in low-volume products being undercosted / overcosted and high-volume products being undercosted / overcosted.

Answer 12

Undercosted

Overcosted

Question 13

The difference between the available capacity and the planned level of utilization.

Answer 13

Idle Capacity

Question 14

The economic value of resources not utilized to produce products or provide services.

Answer 14

Idle Capacity Cost

Question 15

A management technique that uses activity analysis and activity-based costing to help managers identify the value of activities and to make strategic performance management decisions.

Answer 15

Activity-Based Management

Question 16

A diagram that identified each step in making a product or providing a service.

Answer 16

Process Map

Question 17

Something that, in the eyes of the consumer, adds value to a product or service.

Answer 17

High-Value-Added Activity

Question 18

Something that consumes time, resources, or space, but adds little in regard to satisfying customer needs.

Answer 18

Low-Value-Added Activity

Question 19

Identifies customer service activities, cost drivers, and the profitability of each individual costumer or costumer group.

Answer 19

Costumer Profitability Analysis

Question 20

The process of identifying cost activities and cost drivers related to servicing costumers.

Answer 20

Customer Cost Analysis

Question 21

Name the 5 levels of customer costs.

Answer 21

Customer Unit-Level
Customer Batch-Level
Customer-Sustaining
Distribution-Channel
Sales-Sustaining

Question 22

The net present value of estimated future profits from a given customer.

Answer 22

Customer Lifetime Value

Question 23

The assignment of resource costs to certain activities that, in turn, are assigned to other activities before being assigned to the final cost objects.

Answer 23

Multistage ABC

Question 24

A comprehensive and fully integrated management accounting approach that provides management with decision support information based on an operational view of the organization.

Answer 24

Resource Consumption Accounting

Question 25

Name the 3 foundational concepts of resource consumption accounting.

Answer 25

1. Capacity is a function of the resources available.
2. Attributable costs - costs are attached to cost objects only when causality exists.
3. The characteristics of the costs are inherent to the underlying resource.

Question 26

The assignment of resource costs directly to cost objects using the cost per time unit of supplying the resource.

Answer 26

Time-Driven Activity-Based Costing

Question 27

Name the 2 categories of activity-based management.

Answer 27

Operational

Strategic

Question 28

This type of ABM enhances operational efficiency and asset utilization and lowers costs.

Answer 28

Operational

Question 29

This type of ABM focuses on choosing appropriate activities for the operation, elimination nonessential activities, and selecting the most profitable customers.

Answer 29

Strategic

Question 30

The overcosting/undercosting that can occur when using volume-based product costing.

Answer 30

Cross-subsidization

Question 31

____ _____ identified the work performed to carry out the firm’s operations and can include data from existing documents, questionnaires, and interviews.

Answer 31

Activity Analysis