chapter 5 cost accounting!

Question 1

Peanut Butter Costing

Answer 1

A particular costing approach that uses broad averages for assigning the cost of resources uniformly to cost objects when the individual products or services , may in fact, use those resources in nonuniform ways

Question 2

Product Undercosting

Answer 2

a product consumes a high level of resources but is reported to have a low cost/unit

Question 3

Product Overcosting

Answer 3

A product consumes a low level of resources but is reported to have a high cost/unit

Question 4

Product Cost Cross Subsidization

Answer 4

costing outcome where one undercosted (overcosted) product results in at least one other product being overcosted (undercosted)

Question 5

Refined Costing System

Answer 5

reduces the use of broad averages for assigning the cost of resources to cost objects

Question 6

Direct Cost Tracing

Answer 6

Identify as many DC as economically feasible - reduce costs that can be classified as ID, minimize amount allocated

Question 7

Indirect Cost Pools

Answer 7

expand the # of ID cost pools until homogenous - all costs have same or similar cause and effect relationship w/ a single cost driver and used as cost allocation base

Question 8

Cost Allocation Base

Answer 8

whenever possible, use the cost driver (cause of IDc’s) as the cost allocation base for each homo ID cost pool (effect)

Question 9

Activity Based Costing

Answer 9

refines a costing system by identifying individual activities as the fundamental cost objects

Question 10

Activity

Answer 10

an event, task, or unit of work w/ a specific purpose - things a firm does

Question 11

Cost Hierarchy

Answer 11

categorization of indirect costs into different costs pools on the basis of the different types of cost drivers, or cost-allocation bases, or different degrees of difficulty in determining cause and effect relationships

Question 12

Output Unit Level Costs

Answer 12

the costs of activities performed on each individual unit of a product or service

Question 13

Batch Level Costs

Answer 13

the costs of activities related to a group of units of a product or service rather than each individual unit of a product or service

Question 14

Product (Service) Sustaining Costs

Answer 14

Costs o activities undertaken to support individual products/services regardless of the # of units or batches in which the units are produced

Question 15

Ex: Design/R&D costs

Answer 15

Product (Service) sustaining Costs

Question 16

Facility Sustaining Costs

Answer 16

costs of activities that cannot be traced to individual products/services but that support the organization as a whole

Question 17

Ex: Administrative Costs

Answer 17

Facility Sustaining Costs

Question 18

Activity Based Management

Answer 18

a method of management decision making that uses ABC info to improve cost satisfaction & profitability

Question 19

If products are different, then for costing purposes:

Answer 19

an ABC costing system will yield more accurate cost numbers

Question 20

Overcosting a particular product may result in

Answer 20

loss of market share

Question 21

Undercosting of a product is most likely to result from:

Answer 21

overcosting another product

Question 22

A company produces three products; if one product is overcosted then:

Answer 22

one or two products are undercosted

Question 23

Misleading cost numbers are most likely the result of misallocating:

Answer 23

indirect costs

Question 24

An accelerated need for refined cost systems is due to:

Answer 24

intense competition

Question 25

The use of a single indirect-cost rate is more likely to:

Answer 25

undercost both low-volume complex products and undercost lower-priced products

Question 26

Refining a cost system includes:

Answer 26

identifying the activities involved in a process

Question 27

Greater indirect costs are associated with:

Answer 27

specialized engineering drawings; quality specifications and testing; inventoried materials and material control systems

Question 28

Design of an ABC system requires:

Answer 28

that a cause-and-effect relationship exists between resource costs and individual activities, AND an adjustment to product mix

Question 29

A single indirect-cost rate may distort product costs because:

Answer 29

there is an assumption that all support activities affect all products

Question 30

Traditional cost systems distort product costs because:

Answer 30

they apply average support costs to each unit of product

Question 31

Activity-based costing (ABC) can eliminate cost distortions because ABC:

Answer 31

develops cost drivers that have a cause-and-effect relationship with the activities performed

Question 32

Product lines that produce different variations (models, styles, or colors) often require specialized manufacturing activities that translate into:

Answer 32

greater overhead costs for each product line

Question 33

Design costs are an example of:

Answer 33

product-sustaining costs

Question 34

Unit-level cost drivers are most appropriate as an overhead assignment base when:

Answer 34

only one product is manufactured

Question 35

ABC assumes all costs are ________ because over the long run management can adjust the amount of resources employed.

Answer 35

variable