Exam 2

Question 1

activity

Answer 1

any action that an organization undetakes to make or deliver a good or service

Question 2

Technology and increased productivity place emphasis on

Answer 2

cost measurement and control

Question 3

Activity based cost system costs

Answer 3

1. Significantly more info required
2. Increased measurement and processing cost
3. Resistance to change is hard to overcome

Question 4

Variable costs involve changes in ___; fixed costs involve changes in _____

Answer 4

volume

buildings and equipment

Question 5

Automated processes have relatively _____ overhead from _____ so inaccuracies can lead to____

Answer 5

high
machine setups
questionable cost info

Question 6

Costs fluctuate per month and we want to provide customers with ______, so we use the ____

Answer 6

steady prices

predetermined overhead rate

Question 7

Fixed costs are related to #units produced, T/F

Answer 7

F

Question 8

indirect costs

Answer 8

costs that cannot be traced to a department in a cost-effective manner

Question 9

Activity-based cost system benefits

Answer 9

1. Overhead more traceable, allocation is activity- rather than volume- based.
2. Product costs more accurate
3. Management makes better decisions with more accurate info

Question 10

Activity based cost systems

Answer 10

1. assign costs to pools according to causal activity
2. allocation rate
3. allocate

Question 11

Information is relevant if it is:

Answer 11

1) Future oriented

2) different between choices`

Question 12

Automation produces more ____ costs

Answer 12

utilities

Question 13

Estimated costs are used to make decisions about _____. Fact or relevant? Use if it _____.

Answer 13

the future, relevant, adds value

Question 14

Avoidable costs are

Answer 14

costs that can be eliminated by making certain choices

Question 15

Cost object

Answer 15

what you want to know the cost of

Question 16

Cost driver

Answer 16

what causes a cost for an activity

Question 17

Relevant costs can be avoided by____ at the unit level? Batch level? Product? Facility?

Answer 17

Eliminating one unit of product

Not producing another batch

Design of product/not producing product

Some can be avoided by segment elimination

Question 18

unit-level activities

Answer 18

overhead increases if one additional unit is produced

Question 19

Direct costs consist of ____ and can or cannot be _______

Answer 19

direct materials, direct labor, overhead

traced to departments

Question 20

ABM Activity Based Management

Answer 20

Managing organization’s activities to add the greatest value by developing products that satisfy needs of an organizations’ customers

Question 21

If relevant revenue is greater than avoidable cost _____, and if less, _____

Answer 21

eliminate, continue operating

Question 22

Predetermined overhead rate

Answer 22

estimated overhead of the year/estimated allocation base per year

Question 23

Segment elimination considerations

Answer 23

employee lives disrupted
sales of diff products frequently interdependent
what to do with space freed?

Question 24

Special order decision considerations

Answer 24

Can avoid unit and batch costs
Will we profit?

build a new relationship? regular customers could demand a lower price

consider capacity

Question 25

batch-level activities

Answer 25

overhead increases if you create one more batch, setup costs

Question 26

Actual cost
fact or relevant?
past or future?

Answer 26

fact

past, after costs have already been incurred

Question 27

product level activities

Answer 27

relates to entire product

Question 28

facility level activities

Answer 28

utilities, factory-wide

Question 29

Past manufacturing processes were ____ and used a ______ overhead rate based on ______ to allocate costs

Answer 29

labor intensive
single companywide
direct labor hours

Question 30

opportunity costs

Answer 30

what you give up by choosing an option

Question 31

target pricing

Answer 31

customer’s WTP?

Adjust cost to meet margin

Question 32

target costing

Answer 32

Desired cost set before product is designed

cost-reduction a focus

Question 33

Benefits of a traditional cost system

Answer 33

less expensive
requires less time, effort, and data
good for companies with little automation and low overhead

Question 34

Traditional cost system costs

Answer 34

provides only estimates
increased overhead, increased inaccuracies
can lead to poor managerial decisions

Question 35

Managers used reliable cost estimates to

Answer 35

1. price products
2. evaluate performance
3. control operations
4. prepare finanial statements

Question 36

TQM total quality management

Answer 36

continuous strategic/systematic problem-solving by personnel at all levels of organization to eliminate waste, defects, and non-value added activities

managing quality costs to garner highest level of customer satisfaction

Question 37

capacity

Answer 37

max amounts of product with resources on hand

Question 38

allocation rate

Answer 38

total cost/cost driver activity

Question 39

allocated cost

Answer 39

allocation rate x weight of cost driver activity

Question 40

segment elimination decision considerations

Answer 40

1. determine relevant revenue
2. determine avoidable cost
3. compare

Question 41

quantitative

Answer 41

consider costs, increase in profits, or other numerical aspects

Question 42

qualitative

Answer 42

non-quantitative, like the impact of a decision

Question 43

Lowered costs ____ profit, ____ bonuses

Why good/bad?

Answer 43

increase, increase

Inaccuracies are demotivating either way because people get more or less than they deserve

Question 44

Past manufacturing overhead costs were relatively _____ so allocations were ____ but relatively _____

Answer 44

small

inaccurate, insignificant

Question 45

Outsourcing

Answer 45

how much does it actually cost?
unit, batch, and many product level costs avoided
core competency, control, jobs, etc.

Question 46

cost allocation

Answer 46

assigning indirect costs to cost objects

Question 47

Equipment replacement decisions

Answer 47

irrelevant: original cost, current book value, accumulated depreciation, annual depreciation, sunk costs
relevant: opportunity cost, market value of old machine, operating expenses, cost of new machine