M3-Cost Accounting: Part 3

Question 1

Sales price less the cost to complete is defined as the net sales value at split-off. In other words, this is the additional contribution to income generated by completing the product. (true or false)

Answer 1

true

Question 2

Activity-based costing (ABC) assumes that the resource-consuming activities of an enterprise that generate costs are activities and not outputs. ABC is appropriate for all types of cost accumulation systems, including both job order and process costing. (true or false)

Answer 2

true

Activity-based costing divides the production process into activities where costs are accumulated. The production process assumes activities consume resources (direct materials, direct labor, and manufacturing overhead), and that the outcome of the production process requires performance of the activities.

Question 3

Value added costs are those resource uses that provide value to the consumer. The cost of inventorying products, generally moving, handling and storing them, does not add value to the product and is generally considered one of the most significant non-value activities/costs that a manufacturer should reduce because it can be controlled. (true or false)

Answer 3

true

Question 4

An engineered cost bears an observable and known relationship to a quantifiable activity base. (true or false)

Answer 4

true

Question 5

Activity based costing refines product cost information because the cost system emphasizes long-term product analysis (when fixed costs become variable costs). (true or false)

Answer 5

true

Question 6

The use of activity based costing normally results in substantially greater unit costs for low-volume products than is reported by traditional product costing. (true or false)

Answer 6

true

Question 7

Volume-based production (and the associated usage of each cost drive activity) will determine HOW you allocate costs once cost drivers have already been established; it will not be considered as a means for determining WHAT the appropriate cost drivers are for specific activities. Also, volume-based production is a hallmark of traditional costing where the volume alone is the essential driver of how costs are allocated. (true or false)

Answer 7

true