Management Accounting Ch04
Quizzes and Multiple Choice
Quizzes and Multiple Choice
Set of flashcards Details
| Flashcards | 29 |
|---|---|
| Language | English |
| Category | Finance |
| Level | University |
| Created / Updated | 28.05.2021 / 01.02.2023 |
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Even in today’s automated environment, direct labor is sometimes the appropriate basis for assigning overhead cost to products.
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In the first stage of activity-based costing, overhead is assigned to products using cost drivers.
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The first step in activity-based costing is to identify and classify the major activities involved in the manufacture of specific products, and allocate manufacturing overhead to the appropriate cost pools.
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Before costs are allocated to the cost pools, the cost drivers for each cost pool must be identified.
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Under ABC, overhead costs are shifted from the high-volume product to the low-volume product.
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Activity-based costing does not change the amount of overhead costs, but it does allocate those costs in a more accurate manner.
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Overhead costs are not allocated by means of arbitrary volume-based cost drivers under ABC.
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Value-added activities increase the worth of a product or service to customers and involve resource usage that customers are willing to pay for.
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Product-level activities in ABC are required to support or sustain an entire production process.
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Just-in-time processing strives to eliminate inventories by using a “pull approach” in manufacturing.
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The last step in activity-based costing is to
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Machine hours would be an accurate cost driver for
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All of the following are benefits of ABC except it leads to
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The level of ABC activities performed in support of an entire product line are classified as
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Just-in-time processing strives to eliminate inventories by using a
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Activity
Any event, action, transaction, or work sequence that incurs costs when producing a product or performing a service.
Activity-based costing (ABC)
A costing system that allocates overhead to multiple activity cost pools and then assigns the activity cost pools to products or services by means of cost drivers.
Activity-based management (ABM)
Extends ABC from product costing to a comprehensive management tool that focuses on reducing costs and improving processes and decision-making.
Activity cost pool
The overhead cost attributed to a distinct type of activity or related activities.
Batch-level activities
Activities performed for each batch of products rather than for each unit.
Cost driver
Any factor or activity that has a direct cause-effect relationship with the resources consumed. In ABC, cost drivers are used to assign activity cost pools to products or services.
Facility-level activities
Activities required to support or sustain an entire production process.
Just-in-time (JIT) processing
A processing system dedicated to having the right amount of materials, parts, or products arrive as they are needed, thereby reducing the amount of inventory.
Non-value added activity
An activity that, if eliminated, would not reduce the perceived value of a company's product or service.
Product-level activities
Activities performed in support of an entire product line but not always performed every time a new unit or batch of products is produced.
Unit-level activities
Activities performed for each unit of production.
Value-added activity
An activity that increases the perceived value of a product or service to a customer.
The following activity is value-added:
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The first step in the development of an activity-based costing system for a service company is:
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