1、Diff: 1Terms: activity-based costing (ABC)Objective:AACSB: Reflective thinking2) Overcosting a particular product may result in:A) loss of market share B) pricing the product too lowC) operating efficiencies D) understating total product costs 2 product undercosting Analytical skills3) Undercosting
2、of a product is most likely to result from:A) misallocating direct labor costs B) underpricing the product C) overcosting another product D) overstating total product costs C product overcosting4) A company produces three products; if one product is overcosted then:A) one product is undercostedB) on
3、e or two products are undercostedC) two products are undercostedD) no products are undercosted B product-cost cross-subsidization Ethical reasoning5) Misleading cost numbers are most likely the result of misallocating:A) direct material costs B) direct manufacturing labor costs C) indirect costs D)
4、All of these answers are correct. 6) An accelerated need for refined cost systems is due to:A) global monopolies B) rising prices C) intense competition D) a shift toward increased direct costs 7) The use of a single indirect-cost rate is more likely to:A) undercost high-volume simple products B) un
5、dercost low-volume complex products C) undercost lower-priced products D) Both B and C are correct. 8) Uniformly assigning the costs of resources to cost objects when those resources are actually used in a nonuniform way is called:A) overcosting B) undercosting C) peanut-butter costing D) department
6、 costing 9) A top-selling product might actually result in losses for the company. TRUE10) Companies that overcost products will most likely lose market share. 11) If companies increase market share in a given product line because their reported costs are less than their actual costs, they will beco
7、me more profitable in the long run. FALSEExplanation: The actual costs will increase because of the additional sales and the other product lines (which are subsidizing the undercosting of the growing product line) will suffer. The net result will be the company having a lower operating income than i
8、t could have had.12) As product diversity and indirect costs increase, it is usually best to switch away from an activity based cost system to a broad averaging system. The potential significant differences in costs relating to the products as well as the magnitude of indirect costs make a more refi
9、ned costing system more appropriate.13) If a company overcosts one of its products, then it will undercost at least one of its other products. 14) Explain how a top-selling product may actually result in losses for the company. If indirect costs are not properly allocated to the products, a product
10、may appear to cost less than it actually does cost to produce. If the selling price is based on these lower costs, the selling price may actually be lower than the costs needed to produce the product resulting in losses for the company. Objective 5.21) Refining a cost system includes:A) classifying
11、as many costs as indirect costs as is feasible B) creating as many cost pools as possible C) identifying the activities involved in a process D) seeking a lesser level of detail activity2) Greater indirect costs are associated with:A) specialized engineering drawings B) quality specifications and te
12、sting C) inventoried materials and material control systems D3) Design of an ABC system requires:A) that the job bid process be redesigned B) that a cause-and-effect relationship exists between resource costs and individual activities C) an adjustment to product mix 4) Direct costs plus indirect cos
13、ts equal total costs. 5) When refining a costing system, a company should classify as many costs as possible as direct costs. refined costing system6) In a homogeneous cost pool, all costs have a similar cause-and-effect relationship with the cost-allocation base. 7) Indirect labor and distribution
14、costs would most likely be in the same activity-cost pool. Indirect labor and distribution costs would not be in the same activity-cost pool because their cost drivers are very dissimilar. A cost driver of indirect labor would include direct labor hours, while a cost driver of distribution costs wou
15、ld include, for example, cubic feet of cargo moved.8) Direct tracing of costs improves cost accuracy. 9) A cost-allocation base is a necessary element when using a strategy that will refine a costing system.10) What are the factors that are causing many companies to refine their costing systems to o
16、btain more accurate measures of the costs of their products? The first cause is increasing product diversity. Companies are producing many more products than they used to, placing strains on more simple, older cost systems. A second cause is the overall increased in indirect costs and the relative d
17、ecline of direct costs. The indirect nature of these costs requires allocation, and any inaccuracies in allocation of these costs become magnified as these indirect costs increase. A third cause would be advances in information technology that makes complex allocation of indirect costs less burdenso
18、me. Finally, increased competition from both national and international competitors has resulted in more pressure to reduce costs, as well as increasing the need for and value of information to support responses to these new threats. Objective 5.31) ABC systems create:A) one large cost pool B) homog
19、enous activity-related cost pools C) activity-cost pools with a broad focus D) activity-cost pools containing many direct costs 32) Logical cost allocation bases include:A) cubic feet of packages moved to measure distribution activity B) number of setups used to measure setup activity C) number of d
20、esign hours to measure designing activity 3) ABC systems:A) highlight the different levels of activities B) limit cost drivers to units of output C) allocate costs based on the overall level of activity D) generally undercost complex products 4) A single indirect-cost rate may distort product costs
21、because:A) there is an assumption that all support activities affect all products B) it recognizes specific activities that are required to produce a product C) costs are not consistently recorded D) it fails to measure the correct amount of total costs Communication5) Traditional cost systems disto
22、rt product costs because:A) they do not know how to identify the appropriate units B) competitive pricing is ignored C) they emphasize financial accounting requirements D) they apply average support costs to each unit of product 6) Which of the following statements about activity-based costing is NOT true?A) Activity-based costing is useful for allocating marketing and distribut
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