Chapter 9 final

Question 1

Traditional product costing system

Answer 1

uses a predetermined allocation rate (ex, machine hours, direct labor hours, or direct labor dollars)

Question 1

Traditional/Plantwide allocation method

Answer 1

uses one cost pool for the entire plant as in a single stage approach; it uses one overhead allocation rate

Question 2

Acitivity-Based Costing (ABC)

Answer 2

is a two-stage product costing method that first assigns costs to activities and then allocates them to products based on each product’s consumption of activities

• ABC is based on the concept that products consume activites and ativities consume resources

Question 3

Activity-Based Costing provides more detailed

Answer 3

measures of costs than do traitional/plantwide allocation method

Question 4

Acitivity Base Costing has more

Answer 4

cost pools and more cost assignment bases than the traditional/plantwidemethid

Question 5

Activity Based Costing provides more information

Answer 5

about product costs, but requires more record keeping (cost/benefit tradeoff)

Question 6

Activity based costing recognizes that overhead costs

Answer 6

are caused by activities and that activities may not be cause solely on volume