Concept explainers
Identifying terms in ABC and ABM
Use the following terms to complete the sentences that follows; terms may be used once, more than once, or not at all.
Activity proportion
Activity rate
Activity-based management (ABM)
Batch-level
Cost-plus pricing
External failure costs
First
Inspection costs
Internal failure costs
Non-value-added
Non-volume-based
Product level
Second
Target costing
Third
Total costs
Total quality management (TQM)
Unit-level
Value engineering
Value-added
Variable costs
Volume-based
1. ___ include(s) product recalls, warranty costs, and legal fees.
2. ___ involves the functionality of a product to determine which functions add value to the customer and then finding ways to deliver those functions while meeting the target cost.
3. Activities such as expediting an order or scheduling a production run are considered ___.
4. ___ When managers use activity-based costing data to improve operations or reduce costs it is called____.
5. ___In a volume-based cost system, the ___varies in direct relation to volume.
6. ___ activities include research and testing development and product testing.
7. ____allocation measures include the number of quality inspections and the number of design changes.
8. ___ This stage of ABC is assigning indirect costs to activity cost pools with the goal to create as few poos as possible.
9. Dividing the activity demands of each product by the total quantity of the cost driver results in a(n)___.
10. ___ cost systems tend to undercost low-volume, customized, or complex products.
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Chapter 4 Solutions
Managerial Accounting
- For the following activities and their associated resources, identify the following: (1) a cost driver, (2) flexible resources, and (3) committed resources. Also, label each resource as one of the following with respect to the cost driver: (a) variable and (b) fixed.arrow_forwardWhich statement is correct? A. Activity-based cost systems are less costly than traditional cost systems. B. Activity-based cost systems are easier to implement than traditional cost systems. C. Activity-based cost systems are more accurate than traditional cost systems. D. Activity-based cost systems provide the same data as traditional cost systems.arrow_forwardWhat is standard cost ? Explain four purposes of standard costing. NB: This concept should be in accouting prefebly in Performance Management Accountingarrow_forward
- ABC costing attempts to: O A. classify as many costs as indirect costs as is feasible. OB. identify the activities involved in a process. create as many cost pools as possible. O C. O D. seek a lesser level of detail.arrow_forwardBy showing relevant workings, compute the total product cost usingtraditional and ABC systems for Hups model.arrow_forwardA) Write difference between absorption costing and variable costing. B) Write cost pool, cost driver, activity cost, budgeting. C) What are the assumption of CVP analysis? What is BEP point? D) Draw a CVP graph.arrow_forward
- The first step in applying the activity-based costing method isa. Identifying the cost driversb. Computing a cost rate per cost driverc. Identifying the activities that consume resourcesd. Assigning costs to productsarrow_forwardIn an activity-based costing system, the first step in assigning costs is to • A. separate nonvalue-adding activities from value-adding activities. B. identify the appropriate activities for each function. • C. analyze all nonvalue-adding activities to determine if they are necessary support areas. D. accumulate costs for each activity.arrow_forwardTechnology and complexity issues often lead management to simplify and to: Multiple Choice Use activity-based costing and volume-based costing methods. Use volume-based costing and nonlinear estimation methods. Use volume-based costing methods. Use nonlinear estimation methods. Use linear estimation methods.arrow_forward
- Which among the following alternative methods of costing is related to the best use of physical asset at the lowest cost of entity? a. Absorption Costing b. Life Cycle Costing c. Activity Based Costing d. Target Costing The objective function is expressed in terms of: a. Symbols b. Numbers c. Special characters d. Decision variablesarrow_forwardUnder activity -based costing , second stage allocation would involve a. Calculating activity rates b. Assigning costs to cost objects c. Defining activity measures d. None of the given answers e. Assigning costs to cost poolsarrow_forwardWhen using the visual-fit method to estimate a cost function, we can estimate the fixed cost by O the point where the sketched line (through all or most of the data points) intersects the y-axis O calculating the variable cost per unit of the cost driver O the point where the sketched line (through all or most of the data points) intersects the x-axis O subtracting the variable cost at any cost driver level from the total costarrow_forward
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning