Deck 7: Activity-Based Costing and Management

Question 1

An activity dictionary lists the activities in an organization along with some critical activity attributes.

Answer 1

True

Question 2

Activity analysis is the effort expended to identify those factors that are the root causes of activity costs.

Answer 2

False

Question 3

Factors that measure the consumption of activities by products and other cost objects are value-added costs.

Answer 3

False

Question 4

Activity attributes are financial and nonfinancial information items that describe individual activities.

Question 5

Resource drivers are factors that measure the consumption of resources by product.

Question 6

The value-added standard is the waste-free component of the value-added activity.

Question 7

Costs that are caused by the inefficient performance of value-added activities are value added costs.

Question 8

Discretionary activities are necessary to comply with legal mandates.

Question 9

Activity drivers should be classified as either unit-level or nonunit-level.

Question 10

Activities necessary to remain in business are called valuable activities.

Question 11

One of the questions answered by activity analysis should be "What activities are done?"

Question 12

The consumption ratio is the amount of each activity consumed by a product.

Question 13

A work distribution matrix is derived from an interview or a written survey.

Question 14

A volume-based costing system emphasizes direct tracing and driver tracing.

Question 15

Unit-level activities are performed each time a unit is produced.

Question 16

Product diversity means that products consume overhead activities in systematically different proportions.

Question 17

To calculate an activity rate, the practical capacity of each activity must be determined.

Question 18

An activity-based costing system first assigns costs to activities and then to cost objects.

Question 19

One of the three major dimensions of measuring activity performance is quality.

Question 20

Activity inputs are the resources consumed by the activity in producing its output.

Question 21

Match each item with the correct statement below.
a.activity analysis
b.value-added costs
c.velocity
d.activity inputs
e.activity output measure
f.activity output
Result or product of an activity.

Question 22

Control activities are performed by an organization or its customers in response to poor quality.

Question 23

Appraisal costs are incurred to determine whether products and services are conforming to their requirements or customer needs.

Question 24

Velocity is the length of time that it takes to produce a unit o output from the time raw materials are received until the good is delivered.

Question 25

One way to improve efficiency is to produce higher activity output with higher cost.

Question 26

Match each item with the correct statement below.
a.activity analysis
b.value-added costs
c.velocity
d.activity inputs
e.activity output measure
f.activity output
Resources consumed by the activity in producing its output.

Question 27

Environmental internal failure costs are the costs of activities performed after discharging contaminants and waste into the environment.

Question 28

Activity elimination focuses on nonvalue-added activities.

Question 29

Environmental costs are associated with the creation, detection, remediation, and prevention of environmental degradation.

Question 30

Quality improvement can increase profitability by decreasing costs.

Question 31

A defective product is one that does conform to specifications.

Question 32

Control activities are performed by an organization to prevent or detect poor quality.

Question 33

Match each item with the correct statement below.
a.activity drivers
b.activity-based costing system
c.consumption ratio
d.unit-level activities
e.activity attributes
f.resource drivers
Factors that measure the consumption of resources by activities.

Question 34

Match each item with the correct statement below.
a.activity drivers
b.activity-based costing system
c.consumption ratio
d.unit-level activities
e.activity attributes
f.resource drivers
Activities that are performed each time a unit is produced.

Question 35

Environmental costs are costs that are incurred because poor environmental quality may or does exist.

Question 36

Match each item with the correct statement below.
a.activity drivers
b.activity-based costing system
c.consumption ratio
d.unit-level activities
e.activity attributes
f.resource drivers
System that emphasizes direct tracing and driver tracing.

Question 37

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

Question 38

Match each item with the correct statement below.
a.activity drivers
b.activity-based costing system
c.consumption ratio
d.unit-level activities
e.activity attributes
f.resource drivers
Financial and nonfinancial information items that describe individual activities.

Question 39

Match each item with the correct statement below.
a.activity drivers
b.activity-based costing system
c.consumption ratio
d.unit-level activities
e.activity attributes
f.resource drivers
Factors that measure the consumption of activities by products and other cost objects.

Question 40

Zero defects means that most products conform to specifications.

Question 41

____________________ are financial and nonfinancial information items that describe individual activities.

Question 42

When products consume overhead activities in systematically different proportion due to such things as product size, product complexity, setup time and size of batches this is known as _________________.

Question 43

_________________________ assigns costs to activities and then costs to cost objects.

Question 44

Match each item with the correct statement below.
a.cycle time
b.direct tracing
c.activity sharing
d.driver tracing
e.value-added activities
f.activity selection
The length of time it takes to produce a unit of output from the time raw materials are received until the good is delivered to finished goods inventory.

Question 45

Match each item with the correct statement below.
a.cycle time
b.direct tracing
c.activity sharing
d.driver tracing
e.value-added activities
f.activity selection
Cost assignment method used for a cost of a resource that is exclusively used by an activity.

Question 46

_____________________ are factors that measure the consumption of activities by products and other cost objects and can be classified as either unit-level or nonunit-level.

Question 47

The ___________________ is calculated by taking the amount of the activity driver per product and dividing it by total driver quantity.

Question 48

Accurate ___________________ allow managers to make better pricing decisions, customer-mix decisions, and other customer-related decisions that improve profitability.

Question 49

Match each item with the correct statement below.
a.activity analysis
b.value-added costs
c.velocity
d.activity inputs
e.activity output measure
f.activity output
Costs necessary to perform value-added activities with perfect efficiency.

Question 50

Match each item with the correct statement below.
a.cycle time
b.direct tracing
c.activity sharing
d.driver tracing
e.value-added activities
f.activity selection
Activities necessary to remain in business

Question 51

Tracing ________________ costs to suppliers can enable managers to choose the true low-cost supplier.

Question 52

Match each item with the correct statement below.
a.cycle time
b.direct tracing
c.activity sharing
d.driver tracing
e.value-added activities
f.activity selection
Increases the efficiency of necessary activities by using economies of scale.

Question 53

Match each item with the correct statement below.
a.cycle time
b.direct tracing
c.activity sharing
d.driver tracing
e.value-added activities
f.activity selection
Involves choosing among different sets of activities that are caused by competing strategies.

Question 54

A ____________________ is classified as value-added provided it simultaneously meets three conditions.

Question 55

Match each item with the correct statement below.
a.activity analysis
b.value-added costs
c.velocity
d.activity inputs
e.activity output measure
f.activity output
Process that answers the question "How many people perform the activities?"

Question 56

Match each item with the correct statement below.
a.activity analysis
b.value-added costs
c.velocity
d.activity inputs
e.activity output measure
f.activity output
The number of times an activity is performed.

Question 57

A company will sometimes use a ____________________ which identifies the amount of labor consumed by each activity.

Question 58

_________________________ is a system-wide, integrated approach that focuses management's attention on activities with the objective of improving customer value and profit achieved by providing this value.

Question 59

A focus on cost reduction instead of cost assignment and emphasizing the maximization of systemwide performance is known as _______________________.

Question 60

Match each item with the correct statement below.
a.cycle time
b.direct tracing
c.activity sharing
d.driver tracing
e.value-added activities
f.activity selection
___________________ are performed each time a unit is produced.

Question 61

Producing 10,000 units of a cell phone requires $300,000 of prime costs, uses 2,000 machine hours, and takes 1,200 setup hours. The activity rates are $40 per machine hour and $100 per setup hour. What is the unit cost of a cell phone?

A) $60
B) $40
C) $50
D) $100
E) $30

Question 62

Figure 7-4.Honeydew Company produces two products, a high end laptop computer under the label Bunsen Laptops, and an inexpensive desktop computer under the label Beaker Computers. The two products use two overhead activities, with the following costs:
The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production.
Refer to Figure 7-4. Calculate the overhead cost per unit for Bunsen Laptops, using a plantwide rate based on direct labor costs.

A) $9.63 per laptop
B) $22.45 per laptop
C) $5.60 per laptop
D) $7.22 per laptop
E) $7.50 per laptop

Question 63

Setups, material handling, and inspection are all possible examples of

A) product diversity.
B) unit level overhead activities.
C) nonunit-level overhead activities.
D) sustainable development.
E) None of these.

Question 64

Receiving provides 12,000 receiving hours and costs $60,000 per year. What is the activity rate for receiving?

A) $14 per receiving hour
B) $5 per receiving hour
C) $4 per receiving hour
D) $4.50 per receiving hour
E) cannot be determined from this information

Question 65

Cleaning up a polluted lake or an oil spill are examples of __________________ costs.

Question 66

Activities necessary to remain in business are known as _____________________.

Question 67

___________________ are incurred to prevent poor quality in the products and services being produced.

Question 68

Using only unit-based activity drivers to assign nonunit-related overhead costs can cause

A) product diversity.
B) distorted product costs.
C) efficiency.
D) activity sharing.
E) None of these.

Question 69

The moving activity has an expected cost of $160,000. Expected direct labor hours are 40,000, and the expected number of moves is 80,000. The best activity rate for moving is

A) $4 per move.
B) $1.33 per hour-move.
C) $4 per hour.
D) $2 per move.

Question 70

When a new product can be designed to use components already being used by other products this is known as ________________.

Question 71

Reinspection and design changes are examples of _____________________ costs.

Question 72

Figure 7-4.Honeydew Company produces two products, a high end laptop computer under the label Bunsen Laptops, and an inexpensive desktop computer under the label Beaker Computers. The two products use two overhead activities, with the following costs:
The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production.
Refer to Figure 7-4. Calculate Beaker's consumption ratio for setup hours.

A) 0.50
B) 0.45
C) 0.90
D) 0.25
E) 0.75

Question 73

____ is present whenever products have different consumption ratios for different overhead activities.

A) Environmental costs
B) Activity sharing
C) Product diversity
D) Activity inputs
E) Control costs

Question 74

____ costs in many firms represent a much higher percentage of product costs than direct labor.

A) Nonvalue-added
B) Failure
C) Overhead
D) Appraisal
E) Control

Question 75

A(n) ____ ratio measures the proportion of an activity consumed by a product.

A) production
B) consumption
C) efficiency
D) quality
E) usage

Question 76

The activity driver for the shipping activity is the number of orders shipped. Product A uses 20 orders and Product B uses 60 orders. Calculate the consumption ratios for each product.

A) 0.3; 0.7
B) 0.625; 0.375
C) 0.25; 0.75
D) 0.215; 0.785

Question 77

The cost of recalls would be an example of a(n) ____________________.

Question 78

Activity drivers can be classified as either ____ or ____.

A) unit-level; nonunit-level
B) exact; inexact
C) inputs; outputs
D) right; wrong

Question 79

______________ is concerned with doing the activity right the first time it is performed.

Question 80

Companies will incur costs to perform such tasks as recycling products, controlling pollution, reducing contaminates. All of these tasks are examples of _____________________ costs.