Chapter 5

Question 1

Activity-Based Cost Systems

Answer 1

• Have been developed to eliminate distortion
• Assign resource expenses to activities on the basis of how much of the resource each activity uses
• Especially useful when:
  
  • Large cost pool - manufacturing support, customer support, ect.
  • “Diversity” - Diversity of resource usage by products, service or customers

Question 2

Time-Driven Activity-Based Costing

(TDABC)

Answer 2

• Two parameters
  
  • The cost rate for each type of indirect resource
    
    • the resources cost rate is calculated by dividing its cost by the capacity it supplies
  • An estimate of how much of each resource’s capacity is used by the activities perormed to produce the barious products and services

Question 3

Cost of using resource i by product j

Answer 3

Capacity cost rate of resource i x Quantity of capcity of resource i used by product **j **