MS12: ACTIVITY BASED COSTING

Which of the following statements is true?

• Costs that are indirect to products are traceable to some activity.

• The traditional approach to costing uses many different cost drivers.

• Costs that are indirect to products are by definition traceable directly to products.

• All of the above statements are true.

Mass customization can be achieved through the use of

• Activity-based costing.

• Flexible manufacturing systems.

• Just-in-time inventory.

• all of the above.

Process value analysis is a key component of activity-based management that links product costing and

• Continuous improvement.

• Reduction of the number of cost pools.

• Overhead rates based on broad averages.

• Accumulation of heterogeneous cost pools.

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

• Benchmarking.

• Caveat analysis.

• Process value analysis.

• Re-engineering.

A(n) _______________ method first traces costs to a department and then to products.

• absorption costing

• activity-based costing

• direct costing

• traditional costing

Traditional overhead allocations result in which of the following situations?

• The resulting allocations cannot be used for financial reports.

• Overhead costs are assigned as period costs to manufacturing operations.

• Low-volume products are assigned too much, and high-volume products are assigned too little overhead.

• High-volume products are assigned too much overhead, and low-volume products are assigned too little overhead.

Uniformly assigning the costs of resources to cost objects when those resources are actually used in a nonuniform way is called

• department costing.

• overcosting.

• peanut-butter costing.

• undercosting.

Which of the following is NOT a trait of a traditional cost management system?

• allocation intensive

• focus on managing activities

• narrow and rigid product costing

• unit-based drivers

Symptoms of an outdated cost system include all of the following EXCEPT

• competitors' prices appear unrealistically low.

• products that are difficult to produce show little profit.

• the company has a highly profitable niche all to itself.

• product costs change because of changes in financial reporting.

Which of the following is NOT a sign of poor cost data?

• The company seems to have a highly profitably niche all to itself.

• Customers don't balk at price increases for low-volume products.

• Competitors' prices for low-volume products appear much too high.

• Competitors' prices for high-volume products appear much too high.