Chapter 7 Quiz Flashcards
To compute a product’s profit or product margin, the product’s sales and direct costs are needed in addition to the overhead costs computed in an activity-based costing system. True or False?
True
Activity-based costing is a costing method that is designed to provide managers with product cost information for internal decision-making. True or False?
True
Organization-sustaining activities are carried out regardless of which customers are served, which products are produced, how many batches are run, or how many units are made. True or False?
True
A traditional cost system is generally easier to set up and run than an activity-based costing system. True or False?
True
Designing a new backpack at an outdoor sports equipment company is an example of a:
A) Facility-level activity.
B) Batch-level activity.
C) Product-level activity.
D) Unit-level activity.
Product-level activity.
An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because:
A) Under activity-based costing some manufacturing costs (i.e., the costs of idle capacity and organization-sustaining costs) will not be assigned to products.
B) Activity-based costing has not been approved by the United Nation’s International Accounting Board.
C) Under activity-based costing the sum of all product costs does not equal the total costs of the company.
D) Activity-based costing results in less accurate costs than more traditional costing methods based on direct labor-hours or machine-hours.
Under activity-based costing some manufacturing costs (i.e., the costs of idle capacity and organization-sustaining costs) will not be assigned to products.
Machining a part for a product is an example of a:
A) Organization-sustaining activity.
B) Product-level activity.
C) Batch-level activity.
D) Unit-level activity.
Unit-level activity.
In activity-based costing, the activity rate for an activity cost pool is computed by dividing the total overhead cost in the activity cost pool by:
A) The total activity for the activity cost pool.
B) The total direct labor-hours for the activity cost pool.
C) The machine-hours required by the product.
D) The direct labor-hours required by the product.
The total activity for the activity cost pool.
When switching from a traditional costing system to an activity-based costing system that contains some batch-level costs:
A) The unit product costs of both high and low volume products typically increase.
B) The unit product costs of both high and low volume products typically decrease.
C) The unit product costs of high volume products typically decrease and the unit product costs of low volume products typically increase.
D) The unit product costs of high volume products typically increase and the unit product costs of low volume products typically decrease.
The unit product costs of high volume products typically decrease and the unit product costs of low volume products typically increase.
Testing a prototype of a new product is an example of a:
A) Batch-level activity.
B) Unit-level activity.
C) Organization-sustaining activity.
D) Product-level activity.
Product-level activity.
Activity-based costing (ABC) is a costing method that provides managers with cost information for:
A) Strategic and other decisions that potentially affect capacity and therefore “fixed” as well as variable costs.
B) Identifying the net present value of future cash flows associated with investment opportunities.
C) Identifying relevant costs when choosing between alternatives.
D) Preparing financial reports for external parties.
Strategic and other decisions that potentially affect capacity and therefore “fixed” as well as variable costs.
Which of the following statements is true?
A) Unit-level activities are performed each time a new product is introduced.
B) Unit-level activities are performed each time a customer places an order.
C) Unit-level activities are performed each time a unit is produced.
D) Unit-level activities are performed each time a batch is produced.
Unit-level activities are performed each time a unit is produced.
Which of the following activity measures correlates with (or moves in tandem with) the allocation bases used in traditional absorption costing systems?
A) Batch-level activity measures
B) Unit-level activity measures
C) Customer-level activity measures
D) Product-level activity measures
Unit-level activity measures
Which of the following does not describe a difference between activity-based costing (ABC) and traditional absorption costing?
A) ABC uses numerous cost pools to allocate costs to products whereas traditional absorption costing usually uses fewer cost pools.
B) ABC may exclude some manufacturing costs from its product costs whereas traditional absorption costing includes all manufacturing costs in its product cost calculations.
C) ABC usually excludes manufacturing overhead from its calculations whereas traditional absorption costing includes it.
D) ABC may assign nonmanufacturing and manufacturing costs to products whereas traditional absorption costing does not assign nonmanufacturing costs to products.
ABC usually excludes manufacturing overhead from its calculations whereas traditional absorption costing includes it.
Which of the following is an example of a product-level activity?
A) Setting up machines
B) Advertising products
C) Heating a manufacturing facility
D) Assembling Products
Advertising Products
