Exam 2 (Quiz 5) - Chapter 19

Question 1

List:

Parts of Product Cost in Activity-Based Costing System

Answer 1

1. Raw Materials
2. Direct Labor
3. Manufacturing Overhead

Question 2

Answer:

Direct labor and direct materials can be traced directly to ___(a)___ or ___(b)___

Answer 2

a, the specific product

b. the specific service

Question 3

Answer:

Manufacturing overhead is a/an ___(a)___ cost

Answer 3

indirect

Question 4

Answer:

An activity-based costing system is a/an ___(a)___ system that allows you to ___(b)___ across various types of ___(c)___ or ___(d)___

Answer 4

a. more refined
b. allocate indirect cost
c. production lines
d. service types

Question 5

Answer:

An activity-based costing system allows you to avoid ___(a)___

Answer 5

a. product cost distortion

Question 6

Answer:

An activity-based costing system is more ___(a)___, but it gives you a ___(b)___ way to allocate ___(c)___ and ___(d)___ across ___(e)___

Answer 6

a. complicated
b. more accurate
c. indirect costs
d. manufacturing overhead
e. all different types of products

Question 7

Answer:

After an initial ___(a)___ the first step in an activity-based costing system is to ___(b)___ and ___(c)___

Answer 7

a. analysis of the production cycle
b. identify activities
c. categorize different activities into activity centers

Question 8

List:

Examples of Types of Activities

Answer 8

1. Production activities
2. Quality check activities
3. Setup Activities

etc.

Question 9

Answer:

In step 2 of the activity-based costing system you identify the ___(a)___, which is also called the ___(b)___for each ___(c)___

Answer 9

a. allocation base
b. cost driver
c. activity center

Question 10

Answer:

Identifying the allocation base/cost driver for each activity center gives you the flexibility to allocate your ___(a)___ using a different ___(b)___ for each different ___(c)___

Answer 10

a. manufacturing overhead
b. allocation base/cost driver
c. activity center

Question 11

Answer:

In step 2 of the activity-based cost systems, after you identify the cost driver for each activity center, you ___(a)___ the ___(b)___ of each ___(c)___

Answer 11

a. estimate
b. total quantity
c. allocation base

Question 12

Answer:

In step 3 of the activity-based cost system, you divide ___(a)___ by ___(b)___to calculate the ___(c)___ for each ___(d)___

Answer 12

a. estimated cost
b. estimated allocation
c. predetermined overhead ratio
d. activity center

Question 13

Equation:

Predetermined Overhead Ratio

(activity-based cost system)

Answer 13

Estimated Cost / Estimated Allocation

done for each activity center

Question 14

Answer:

In step 4 of the activity-based cost system, you calculate ___(a)___ and then allocate that ___(b)___ to the ___(c)___

Answer 14

a. allocated manufacturable overhead
b. manufacturing overhead
c. cost objective

Question 15

List:

Steps in Activity-Based Cost System

Answer 15

1. Identify the different activities and categorize them into activity centers, then estimate the total cost of each
2. Identify the allocation base/cost driver for each activity center and estimate the total quantity of each allocation base/cost driver
3. Calculate predetermined overhead ration for each activity center
4. Calculate manufacturable overhead and allocate it to the cost objective

Question 16

Answer:

The biggest difference between traditional costing systems and the activity based costing system is the ___(a)___ where in traditional systems you have ___(b)___ and in the activity-based costing system you have ___(c)___

Answer 16

a. number of allocation ratios
b. one
c. as many as you need

Question 17

Define:

Activity-Based Management

Answer 17

ABM

Management tool that uses activity-based costing to make decisions

Question 18

List:

Types of Decisions Made Using Activity-Based Management

Answer 18

1. Pricing and Product Mixing Decisions

2. Cost Cutting Decisions (aka cost control decisions)

Question 19

Answer:

Cost cutting decisions are also known as ___(a)___

Answer 19

a. cost control decisions

Question 20

List:

Types of Pricing Decisions

Answer 20

1. Target Pricing

2. Cost-Based Pricing

Question 21

Define:

Target Pricing

Answer 21

We set up the price first based on the market.

We don’t have control

Take price less desired profit and get target cost - try to keep cost within this target

Question 22

Answer:

To determine target cost you take ___(a)___ (set by the ___(b)___, so we don’t have ___(c)___) and subtract ___(d)___

Answer 22

a. price
b. market
c. control
d. desired profit

Question 23

Define:

Cost-Based Pricing

Answer 23

First calculate full cost and then add desired profit to get sales price

Question 24

Answer:

Companies can use a combination of ___(a)___ pricing and ___(b)___

Answer 24

a. target

b. cost-based

Question 25

Answer:

In cost-based pricing you first calculate ___(a)___ and then add ___(b)___ to get ___(c)___

Answer 25

a. full cost
b. desired profit
c. sales price

Question 26

Answer:

Activity-based costing is more ___(a)___, but it is also more ___(b)___

Answer 26

a. complicated

b. accurate

Question 27

List:

Reasons Activity-Based Costing can be Troublsome

Answer 27

1. It is very expensive - must constantly make changes and adjustments
2. If there is any inaccuracy you can still end up with a distorted cost

Question 28

Define:

Just-In-Time (JIT) System

Answer 28

Concerned with inventory

You order exactly the direct labor and materials you need, exactly when you need it to produce the exact number of products needed

You don’t maintain physical inventories (they are expensive to maintain/store)

Question 29

List:

What You Need to Be Able to Utilize Just-In-Time System

Answer 29

1. A very accurate inventory control system
2. A very good relationship with vendors
3. A very good group of laborers

Question 30

Answer:

With JIT, you are going to have a ___(a)___ rate so you do not produce ____(b)___, so defects are ___(c)___

Answer 30

a. zero defect
b. any more than the exact number you need
c. aggressively eliminated

Question 31

Answer:

In JIT you do have ___(a)___, but you do not have a/an ___(b)___ account because ___(c)___

Answer 31

a. raw materials
b. work in progress
c. everything will be finished and nothing will be left over

Question 32

Answer:

In JIT, when you get an order, you call in ____(a)____ that stays in the ___(b)___ for the ___(c)___ and then the ___(d)____ is/are delivered ___(e)___

Answer 32

a. raw materials/direct labor
b. work cell
c. order
d. finished goods
e. directly and immediately to customers

Question 33

Answer:

JIT is a ___(a)___ system created where ___(b)___ to eliminate the need for ___(c)___

Answer 33

a. very expensive
b. space is limited
c. keeping physical inventories

Question 34

List:

Issues with Just-In-Time (JIT) System

Answer 34

1. You will loose sales if materials are late or poor quality
2. You have to account for future volatility with vendors and maintain some inventory for these situations