Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 12, Problem 13Q
13. Respond to the following statement: ‘The allocation base chosen is unimportant. What is important in product costing is that overhead costs be assigned to production in a specific period by an allocation process.”
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Since overhead costs are indirect costs,
Group of answer choices
they require some process of allocation.
they can be easily traced to production.
they cannot be allocated.
a predetermined overhead rate is not advantageous.
TRUE OR FALSE
In activity-based costing systems, costs are not classified as either direct or indirect for as long as they can fall at any point on a spectrum between a direct physical trading and arbitrary allocation.
Discuss how traditional methods of allocating overhead to products may not provide a good measure of overhead resources used. How might activity based costing overcome these limitations?
Chapter 12 Solutions
Survey Of Accounting
Ch. 12 - 1.What is a cost object? Identify four different...Ch. 12 - Prob. 2QCh. 12 - 3.If the cost object is a manufactured product,...Ch. 12 - Prob. 4QCh. 12 - Prob. 5QCh. 12 - Prob. 6QCh. 12 - Prob. 7QCh. 12 - Prob. 8QCh. 12 - Prob. 9QCh. 12 - 10.Why are some manufacturing costs not directly...
Ch. 12 - Prob. 11QCh. 12 - 12.On January 31, the managers of Integra, Inc....Ch. 12 - 13.Respond to the following statement: The...Ch. 12 - Prob. 14QCh. 12 - Define the term cost pool. How are cost pools...Ch. 12 - LO 4-1Exercise 4-1A Direct versus indirect costs...Ch. 12 - Prob. 2ECh. 12 - Prob. 3ECh. 12 - Exercise 4-4APooling overhead cost Ware...Ch. 12 - Prob. 5ECh. 12 - Exercise 4-5A Allocating overhead cost among...Ch. 12 - Prob. 7ECh. 12 - Prob. 8ECh. 12 - Exercise 4-6AAllocating overhead costs among...Ch. 12 - Exercise 4-9AAllocating to solve a timing problem...Ch. 12 - Prob. 11ECh. 12 - Exercise 4-11AHow the allocation of fixed cost...Ch. 12 - Prob. 13ECh. 12 - Problem 4-17A Cost accumulation and allocation...Ch. 12 - Problem 4-18A Selecting an appropriate cost driver...Ch. 12 - Problem 4-19A Cost allocation in a service...Ch. 12 - Prob. 17PCh. 12 - Problem 4-21A Allocation to accomplish smoothing...Ch. 12 - Problem 4-22A Allocating indirect costs between...Ch. 12 - Prob. 20PCh. 12 - Prob. 1ATCCh. 12 - Prob. 2ATCCh. 12 - ATC 4-3 Research Assignment Using real-world data...Ch. 12 - Prob. 4ATCCh. 12 - Prob. 5ATC
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- Which of the following is a limitation of activity-based costing? More cost pools Poorer management decisions Less control over overhead costs Some arbitrary allocations continuearrow_forwardWhich of the following points about the Activity-based costing (ABC) system is NOT a correct observation: a. Under ABC the unit cost of a product will necessary be less than the unit cost under traditional full (absorption) costing. b. Activities are considered resource drivers because they eat up resources necessary for the activities to happen. c. ABC may generate results that are not suitable for external reporting under IFRS/GAAP. d. Batch-level activities produce costs that may be in proportion to the number of units produced.arrow_forward“In accounting for spoiled units, we are dealing with cost assignment rather than cost incurrence.”Explain.arrow_forward
- Which of the following statements about time-driven activity-based costing is true? a. Time-driven ABC requires estimates of only two items, namely: the cost per time unit of supplying resource capacity, and unit times of consumption of resource capacity by products, services or customers b. Time-driven ABC is a simplification of traditional ABC. Due to this simplification, time-driven ABC is unable to adequately capture the complexity of real world operations c. With time-driven ABC, managers assign resource costs to each activity and then to products or customers rather than directly estimating the resource demands required by each product d. Survey evidence has revealed that ABC adoption rates are fairly low due to oversimplification and perceived inaccuracies. As a result, a more complex approach called time-driven ABC was implemented in order to overcome the perceived inaccuracies e. None of the available statements are truearrow_forwardWhich of the following must be known about a production process in order to institute avariable costing system?a. The variable and fixed components of all costs related to production.b. The controllable and uncontrollable components of all costs related to productionc. Standard production rates and times for all elements of production.d. Contribution margin and breakeven point for all goods in production.arrow_forwardthe underlying differnce between absorption costing and variable costing lies in the treatment of A. prime costs B. variable manufacturing overhead c. fixed manufacturing overhead d. fixed non-manufacturing overhead e. all the abovearrow_forward
- "Activity-based costing does a better job of allocating both direct and indirect cost than traditional methods do.” Is this statement true, false, or uncertain?arrow_forward5) Choosing to outsource a component of a product or manufacture it internally is an example of a(n): A. Opportunity cost. B. Sunk cost. C. Out-of-pocket cost. D. Period cost. E. Fixed cost.arrow_forwardCost allocation bases are ideally based on a cause and effect basis. That is not always easy when allocating fixed costs. Why might this be so?arrow_forward
- The following statements are correct excerpt?A. Different costs are used for different purposesB. Costing systems vary depending on the level of sophistication for cost assignmentC. Both direct and indirect costs are exclusively traced to cost object in the same wayD. Cost allocation occurs when quantity of resources consumed by a particular cost object cannot be directly measuredarrow_forward28. Which of the following must be known about a production process to institute a variable costing system? a. The direct and indirect costs related to production b. Standard quantities and prices for all production inputs c. The variable and fixed components of manufacturing costs d. The capacity level or denominator level to be used in allocating fixed overhead costs 29. What costs are treated as product costs under variable costing? a. All variable costs b. All direct costs only c. All manufacturing costs d. Only variable production costs 30. Which of the wing would most decrease the product cost per unit under variable costing? a. A decrease in the commission paid to salesmen for each unit sold b. An increase in the number of units sold c. A decrease in the remaining useful life of a factory equipment depreciated using the straight line method d. An increase in the remaining useful life of a factory equipment depreciated on the units-of production method.arrow_forward:Under activity-based costing, the process of assigning costs to cost objects is called First stage allocation .a O Calculation of cost object margin .b O None of the given answers .c O Third stage allocation .d O Second stage allocation .e Oarrow_forward
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