Exam 2 (Quiz 5) - Chapter 19 Flashcards
List:
Parts of Product Cost in Activity-Based Costing System
- Raw Materials
- Direct Labor
- Manufacturing Overhead
Answer:
Direct labor and direct materials can be traced directly to ___(a)___ or ___(b)___
a, the specific product
b. the specific service
Answer:
Manufacturing overhead is a/an ___(a)___ cost
indirect
Answer:
An activity-based costing system is a/an ___(a)___ system that allows you to ___(b)___ across various types of ___(c)___ or ___(d)___
a. more refined
b. allocate indirect cost
c. production lines
d. service types
Answer:
An activity-based costing system allows you to avoid ___(a)___
a. product cost distortion
Answer:
An activity-based costing system is more ___(a)___, but it gives you a ___(b)___ way to allocate ___(c)___ and ___(d)___ across ___(e)___
a. complicated
b. more accurate
c. indirect costs
d. manufacturing overhead
e. all different types of products
Answer:
After an initial ___(a)___ the first step in an activity-based costing system is to ___(b)___ and ___(c)___
a. analysis of the production cycle
b. identify activities
c. categorize different activities into activity centers
List:
Examples of Types of Activities
- Production activities
- Quality check activities
- Setup Activities
etc.
Answer:
In step 2 of the activity-based costing system you identify the ___(a)___, which is also called the ___(b)___for each ___(c)___
a. allocation base
b. cost driver
c. activity center
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)___
a. manufacturing overhead
b. allocation base/cost driver
c. activity center
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)___
a. estimate
b. total quantity
c. allocation base
Answer:
In step 3 of the activity-based cost system, you divide ___(a)___ by ___(b)___to calculate the ___(c)___ for each ___(d)___
a. estimated cost
b. estimated allocation
c. predetermined overhead ratio
d. activity center
Equation:
Predetermined Overhead Ratio
(activity-based cost system)
Estimated Cost / Estimated Allocation
done for each activity center
Answer:
In step 4 of the activity-based cost system, you calculate ___(a)___ and then allocate that ___(b)___ to the ___(c)___
a. allocated manufacturable overhead
b. manufacturing overhead
c. cost objective
List:
Steps in Activity-Based Cost System
- Identify the different activities and categorize them into activity centers, then estimate the total cost of each
- Identify the allocation base/cost driver for each activity center and estimate the total quantity of each allocation base/cost driver
- Calculate predetermined overhead ration for each activity center
- Calculate manufacturable overhead and allocate it to the cost objective
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)___
a. number of allocation ratios
b. one
c. as many as you need
Define:
Activity-Based Management
ABM
Management tool that uses activity-based costing to make decisions
List:
Types of Decisions Made Using Activity-Based Management
- Pricing and Product Mixing Decisions
2. Cost Cutting Decisions (aka cost control decisions)
Answer:
Cost cutting decisions are also known as ___(a)___
a. cost control decisions
List:
Types of Pricing Decisions
- Target Pricing
2. Cost-Based Pricing
Define:
Target Pricing
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
Answer:
To determine target cost you take ___(a)___ (set by the ___(b)___, so we don’t have ___(c)___) and subtract ___(d)___
a. price
b. market
c. control
d. desired profit
Define:
Cost-Based Pricing
First calculate full cost and then add desired profit to get sales price
Answer:
Companies can use a combination of ___(a)___ pricing and ___(b)___
a. target
b. cost-based
Answer:
In cost-based pricing you first calculate ___(a)___ and then add ___(b)___ to get ___(c)___
a. full cost
b. desired profit
c. sales price
Answer:
Activity-based costing is more ___(a)___, but it is also more ___(b)___
a. complicated
b. accurate
List:
Reasons Activity-Based Costing can be Troublsome
- It is very expensive - must constantly make changes and adjustments
- If there is any inaccuracy you can still end up with a distorted cost
Define:
Just-In-Time (JIT) System
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)
List:
What You Need to Be Able to Utilize Just-In-Time System
- A very accurate inventory control system
- A very good relationship with vendors
- A very good group of laborers
Answer:
With JIT, you are going to have a ___(a)___ rate so you do not produce ____(b)___, so defects are ___(c)___
a. zero defect
b. any more than the exact number you need
c. aggressively eliminated
Answer:
In JIT you do have ___(a)___, but you do not have a/an ___(b)___ account because ___(c)___
a. raw materials
b. work in progress
c. everything will be finished and nothing will be left over
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)___
a. raw materials/direct labor
b. work cell
c. order
d. finished goods
e. directly and immediately to customers
Answer:
JIT is a ___(a)___ system created where ___(b)___ to eliminate the need for ___(c)___
a. very expensive
b. space is limited
c. keeping physical inventories
List:
Issues with Just-In-Time (JIT) System
- You will loose sales if materials are late or poor quality
- You have to account for future volatility with vendors and maintain some inventory for these situations
