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Unformatted text preview: Chapter 8 Activity Based Costing 396 Garrison, Managerial Accounting, 12th Edition True/False Questions 1. The costs of activities that are classified as unit-level should be proportional to the number of units produced. Answer: True Level: Easy LO: 1 2. Batch-level activities are performed each time a batch is handled or processed, regardless of how many units are in the batch. Answer: True Level: Easy LO: 1 3. Product-level activities relate to specific products and typically must be carried out regardless of how many batches are run or units of product are made. Answer: True Level: Easy LO: 1 4. Activity-based management seeks to eliminate waste by allocating costs to products that waste resources. Answer: False Level: Medium LO: 1 5. Activity-based costing may supplement, rather than replace, a company's formal cost accounting system. Answer: True Level: Easy LO: 1 6. In activity-based costing, nonmanufacturing costs as well as manufacturing costs may be assigned to products. Answer: True Level: Easy LO: 1 7. When activity-based costing is used for internal decision-making, the costs of idle capacity should be considered period costs that flow through to the income statement as an expense of the current period. Answer: True Level: Medium LO: 1 8. A transaction driver provides a simple count of the number of times that an activity occurs. Answer: True Level: Medium LO: 1 Chapter 8 Activity Based Costing Garrison, Managerial Accounting, 12th Edition 397 9. In activity-based costing, all manufacturing costs must be included in product costs. Answer: False Level: Medium LO: 1 10. The first-stage allocation in activity-based costing is the process by which overhead costs are assigned to activity cost pools. Answer: True Level: Easy LO: 2 11. The activity rates computed in activity-based costing can provide valuable clues concerning where there is waste and scope for improvement in an organization. Answer: True Level: Easy LO: 3 12. In the second-stage allocation in activity-based costing, costs that were not allocated in the first stage are assigned to the company's most profitable products. Answer: False Level: Medium LO: 4 13. If a product has a negative product margin (i.e., loss) according to an activity-based costing system, it should be dropped. Answer: False Level: Medium LO: 5 14. When a company implements activity-based costing system, manufacturing overhead cost is often shifted from low volume products to high volume products, with a higher unit cost resulting for the high volume products. Answer: False Level: Medium LO: 6 15. An action analysis report provides more detail about costs and how they might adjust to changes in activity than a conventional activity-based costing analysis....
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- Fall '08