Cac Midterm Reviewer

(True or False). Competitors prices for high volume products appear much too high is a sign of poor cost data

In activity-based costing, engineering designs are considered as: (non-value added or value-added activity?)

In activity-based costing, repair of machines are considered as: (non-value added or value-added activity?)

In the pharmaceutical or food industry, quality control inspections would most likely be viewed as: (non-value added or value-added activity?)

The basic assumption of ABC is that:

A. products require the performance of activities, and activities consume resources.

B. only variable cost are included in activity-cost pools

C. manufacturing cist vary directly with units of production

In the pharmaceutical or food industry, quality control inspections would most likely be viewed as: (non-value added or value-added activity?)

(True or False) ABC and GAAP differ in a way that the ABC does not define product cost in same manner as GAAP

ABC should be used in:

A. multiple product firms with only single process

B. multiple product firms with multiple processing steps

Assembling is an example of: (non-value added or value-added activity?)

Reworking, handling, and expenditing are examples of: (non-value added or value-added activity?)

(True or False) Products make diverse demands on resources because of the difference in volume, batch size, and complexity

Products does not diverse demands on resources because of the difference in selling price

The unique feature of an ABC system is the emphasis on: (multiple cost pools or individual activities?)

(True or False). The design of an ABC system requires a cause-and-effect relationship existing between resource cost and individual activities

ABC systems create (heterogenous or homogenous) activity-related cost pools.

Which of the following statementz about ABC is NOT TRUE?

A. Activity costing is more likely to result in major difference from traditional costing if the firm manufactures onky one producy rather than multiple products

B. ABC is useful in allocating marketing & distribution cost.

C. In ABC, cost drivers are what causes costs to be incurred.

D. ABC differs from traditional costing in that products are not cross-subsidized.

(True or False). ABC is useful in allocating marketing & distribution cost

(True or False). In ABC, cost drivers are what causes costs to be incurred

(True or False). ABC and traditional costing both uses cross-subsidization method

If activity-based costing is implemented in an organization without any other changes being effected, the tital overhead cost will be:

A. Reduced due to the elimination of non-value-added activities

B. Remain constant and simply be spread over products differently

C. Be increazed becauze of the need for additional people to gather information on cost drivers and cost pools.

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

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

An objective of activity-based management is to:

A. reduce or eliminate non-value-added activities incurred to make a product or provide a service

B. eliminate the majority of centralized activities in an organization

C. institute responsibility accounting system in decentralized oganizations

Symptoms of an outdated cost system include all of the following except:

A. product cost change because od changes in financial reporting

B. products that are difficult to prodyce show little profit

C. competitor prices appear unrealistically low

D. the compant has highly profutable niche all to itself

(True or False). Product cost change because of the changes in financial reporting is a symptom of an outdated cost system.

Traditional overhead allocation results in which of the following situations:

A. High-volume prodycts are assigned too much overhead, ans low volume products are assigned too little overheadB. Low-volume prodycts are assigned too much overhead, ans low volume products are assigned too little overheadC. Overjead costs are assigned as period cost to manufacturing operation

Traditionally, managers have focused cost redyction efforts on:

A. Activities

B. Processes

C. Departments

D. Cost

(True or False). Unit-based drivers, allocation intensive, and narrow-rigid product costing are traits of traditional costing management systems.

It describes a costing approach that uses broad averages for assigning the cost of resources uniformly to cost obiects when the individual products or services uses resources in non-uniform ways.

A product consumes high level of resources but is reported to have low cost per unit

A product consumes low level of resources but is reported to have low cost per unit

(True or False). Product-cost cross-subsidization states that if a company undercosts one of its products, it will overcost at least one of its products.

It is about making changes to simple costing system that reduces the use od broad averages for assigning cost of resources to cost objects and provides better measurement of cost of overjead resources used by different cost ovjects.

It is a strategy that refines a costing system by ficusing on individual activities as fubdamental cost ovjects. It uses cost of activities as the basus for assigning cost to other cost ovjects suxh as product or services

It allocated overhead to mulyiple activity cost pools and assigns the activity pool to product by means of cost drivers

(True or False). Activity Cost Pool is a factor that causes change in cost pool for particular activity. It is a basis for cost allocation.

It is any factor or activity that had a direct cause-effect relationship

It is any event, action, transacyion, or work sequence that incurs cost when producing a prodyct or providing a service

It is a bucket ib which costs are accumulated that relate to a single activity measure in ABC system

(True or False). Non-value-added activities are necessary and non-eliminable to produce the products

These are activities that do not make the product or service more valuable to tbe customer

All are benefits of ABC, except:

A. It leads to more cost pools

B. It leads arbitrary allocations to continue

C. It leads to enhanced control over overhead cost

D. It leads to better management decisions.

(True or False). Pricing and product mix decisions; cost reducyion and process improvement decision; product design decisions; and decisions for planning snd managing activities are the four decisions for which ABC information is useful.

(True or False). ABC can be expensive.

(True or False). The great difference in the volume and manufacturing complexity of product lines indicates that ABC is the superior costing system to be utilized.

(True or False). The great number, diversity, and requidement of differing degrees od support services in product lines indicates that ABC is the superior costing system to be utilized.

(Traditional vs. ABC). What system should we use if the overhead cost constitute a significant portion of total cost?

(True or False). If the manufacturing process or the nukber of prodycts significantly changes, it is best to utilize trsditional method than ABC.

(True or False). Using ABC as the superior costing system is the most efficient strategy to utilize when the production or marketing managers keep on ignoring the data provided by the existing systems.

These activity levels are performed each time a batch is handled or processed regardless of how kany units are there in a batch

These activity levels are performed each time a unit is produced

(True or False). Prodyct-level activities relate to specific prodycts that typically must be carried out regardless of how many batches are run or units of products are produced or sold

These organization-sustaining activities are carried out regardless of which customers are served, which products are prodyced, how many batches are run, or how many units are made

(True or False). Assigning overhead cost to activity cost pools is the second step for implementing ABC.

(True or False). The last step in implementing ABC is assigning overhead cost to cost objects using activity rates and activity measures.

(True or False). Assigning overhead cost to cost objects using activity rates and activity measures is the fourth step in implementing ABC.

(True or False). Defining activities, activity cost pools, and activity measures is the first step in implementing activity-based costing.

Accounting system that collects financial and operating data on basis of the underlying nature and extent of cost drivers

The resource utilized by given product divided by total amount of resource available

(True or False). Cost that are indirect to products are traceable to some activity

(True or False). Mass customization can be achieved through the use of traditional costing

(True or False). Process value analysis is a key component of activity-based management that links product costing and cobtinuous improvements

An approach to developing new ways to perform existing activities is called ___?

It is a method that first traces costs to a department and then to products

A method that first traces actovities and then to products

Uniformly assigning the cost of resources to cost ovjects when resoyrces are actually used in non-uniform way is called ___?

(True or False). Unit level cost driver are kost appropriate overhead assignment base when only one product is manufactured.

A company keeps 20 days of raw materials inventory on hand to avoid shutdowns due to raw material shortages. Carrying cost average of ₱9000 per day, a competitor keeps 10 days of inventory on hand the competitor's carrying aversge of ₱5000. Value-added cost are ___?

A. 9,000

B. 5,000

C. 0

D. 14,000

Each unit of product requires 8 gallons of raw material. Due to scrap and rework, each unit has been averaging 9 galoons if raw materials. The raw material costs ₱4 per gallon. Value-added costs are ___?

A. 2

B. 4

C. 32

D. 36

Companies that produces honogenous (identical) prodycts that are not made to order and are produced in large volumes ex. cereal, bread, automotive parts utilizes ____ as its primary costing method.

The equivalent unit formula

(True or False). Process costing is most appropriate when manufacturing large batches of homogenous products.

(True or False). Conversion costs include all manufacturing costs other than direct materials

(True or False). Equivalent units are computed to assign costs to partially completed units

(True or False.) The weighted average method combines beginning inventory and current production to compute the cost per unit of production.

(True or False). The FIFO method combines beginning inventory and current production to compute the cost per unit of production.

(True or False). The weighted average method separates beginning inventory and current production to compute the cost per unit of production.

(True or False). The FIFO method separates beginning inventory and current production to compute the cost per unit of production.

(True or False). The numerator in the formula for equivalent units includes all beginning inventory costs when using the weighted average costing assumption.

(True or False). The numerator in the formula for equivalent units includes all beginning inventory costs when using the FIFO costing assumption.

(True or False). The weighted average costing method assumes that units in the beginning inventory are the first units transferred.

(True or False). The FIFO costing method assumes that units in the beginning inventory are the first units transferred.

EUP calculations for standard process costing are the same as ___?

(True or False). In a FIFO process costing system, which of the following are assumed to be completed first in the current period?

A. units started this period b. units started last period c. units transferred out

(True or False). To compute equivalent units of production using the FIFO method of process costing, work for the current period must be stated in units completed from beginning inventory, units started and completed during the period, and units partially completed in ending inventory.

(True or False). The FIFO method of process costing will produce the same cost of goods transferred out amount as the weighted average method when there is no beginning Work in Process Inventory.

(True or False). The primary difference between the FIFO and weighted average methods of process costing is in the treatment of beginning Work in Process Inventory.

In a cost of production report using process costing, transferred-in costs are similar to the:

a. cost of material added at the beginning of production. b. conversion cost added during the period. c. cost transferred out to the next department.

Transferred-in cost represents the cost from:

a. the last department only.

b. the last production cycle.

c. all prior departments.

Which cost accumulation procedure is most applicable in continuous mass-production manufacturing environments?

(True or False). Process costing is used in companies that engage in road and bridge construction.

A producer of ________ would not use a process costing system. a. gasoline b. potato chips c. stained glass windows

A process costing system is used by a company that a. produces heterogeneous products. b. produces items by special request of customers. c. produces homogeneous products.

It is the best cost accumulation procedure to use for continuous mass production of like units?

(True or False). Equivalent units of production are equal to the number of whole units that could have been completed if all work of the period had been used to produce whole units.

In a process costing system using the weighted average method, cost per equivalent unit for a given cost component is found by dividing which of the following by EUP? a. only current period cost b. current period cost plus the cost of beginning inventory c. current period cost less the cost of beginning inventory

The weighted average method is thought by some accountants to be inferior to the FIFO method because it a. is more difficult to apply. b. only considers the last units worked on. c. commingles costs of two periods.

(True or False). The first step in determining the cost per EUP per cost component under the weighted average method is to add the beginning Work in Process Inventory cost to the current period's production cost.

The difference between EUP calculated using FIFO and EUP calculated using weighted average is the equivalent units:

a. started and completed during the period.b. residing in beginning Work in Process Inventory.