1. Activity-based cost management (ABM) uses the information provided by activity-based
costing (ABC) to identify ways to improve operations.
2. Activity-based costing (ABC) can be used to provide information for managerial decision–
making in service, merchandising,
and
manufacturing companies.
3. Storing materials, work-in-process items, and finished goods in inventory are essential,
value-added activities in most companies.
4. In general, decreasing (or eliminating) the resources committed to nonvalue-added
activities will decrease customer response time.
5. In general, the unit-level costs in an activity-based costing (ABC) system are variable
costs.
6. In general, the capacity-level costs in an activity-based costing (ABC) system are variable
costs.
7. Managerial decisions based on activity-based costing (ABC) information affect only
volume-level, batch-level, and product-level costs.
8. The basic concepts involved in activity-based costing (ABC) can be used to determine
customer profitability as well as product costs.
9. The
cost driver rate
is computed by dividing the total cost per activity by the estimated
number of units produced.
10. Activity-based costing (ABC) techniques used to evaluate
customer profitability
can also
be applied to evaluating suppliers.
11. The difference between the resources used and the resources supplied is called
unused
resource capacity
in a typical activity-based cost management (ABM) system.
12. Unused resource capacity plus the amount of the resources used is equal to the amount
of resources supplied.
13.
Theoretical
capacity is the amount of production possible assuming expected downtime
for scheduled maintenance and normal breaks and vacations.
14. Theoretical capacity is the long-run expected volume based on reasonably attainable
working conditions.
15. Unused capacity costs incurred for the benefit of a company’s customers (e.g., meet
seasonal demands) should be assigned to the customers that require (use) the excess capacity.
16. In general, managerial decisions affecting capacity-level costs and activities also affect
volume-level, batch-level, and product-level cost and activities.
17.
Tangible
customer expectations include how the product’s salespeople treat customers
and the time required to deliver the product to the customer.
18. Quality can be defined as the degree to which a product or service performs as it was
designed to.
19. A
cost of quality
system is based on the trade-off between incurring costs to meet product
(or service) specifications and the costs of failing to meet those specifications.
20. Internal failure costs include materials wasted in the production process and correcting
products before they are sold.
21. Activity analysis is one of the first stages in implementing an activity-based costing
system. Which of the following steps in “activity analysis” is usually performed first?
22. Activity analysis is an important approach to operations control and the successful
implementation of an activity-based costing (ABC) system. Which of the following procedures is
not
part of activity analysis?
23. Which of the following activities is most likely to be classified as
value-added
for a
manufacturing company?
24. Which of the following activities is most likely to be classified as
value-added
for a
merchandise company?
25. Activity-based cost management (ABM) can best be defined as:
26. Which of the following items would be classified as a
volume-level
cost in an activity-
based cost management (ABM) system?
27. Which of the following items would be classified as a
batch-level
cost in an activity-based
cost management (ABM) system?
28. Which of the following items would be classified as a
product-level
cost in an activity-
based cost management (ABM) system?
29. Which of the following items would not be used as the cost driver for a
volume-level
cost
in an activity-based cost management (ABM) system?
30. In an activity-based cost management (ABM) system,
facility-level
costs are those that
are incurred to:
31. Activity-based costing (ABC) information cannot be used by managerial decision-makers
to evaluate the:
32. Green Lumber Supply noticed a recent decline in the amount of purchases from a key
customer. Worried that other customers might also reduce their purchases, Green’s management
decided to evaluate the cost of its delivery service. Which of the following cost drivers is more
appropriate for general administrative costs of the Delivery Department?
33. The
unused resource capacity
is the difference between the resources supplied and the
resources:
34. The amount of
resources used
in an activity-based costing (ABC) system for a specific
activity is computed by multiplying the:
35. The amount of production possible under normal working conditions, including planned
downtime and scheduled vacations, is called:
36. Which of the following statements is(are) true?
(A) Theoretical capacity is the long-run expected volume based on reasonably attainable working
conditions.
(B) The cost of excess capacity is allocated to individual cost objects using the cost driver rate.
37. Which of the following statement is(are) true?
(A) Unused capacity costs incurred for the benefit of a company’s customers (e.g., meet seasonal
demands) should be assigned to the customers that require (use) the excess capacity.
(B) In general, managerial decisions affecting capacity-level costs and activities also affect
volume-level, batch-level, and product-level cost and activities.