22806855-Activity-Based-Costing - ACTIVITY-BASED COSTING...

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ACTIVITY-BASED COSTING TRUE-FALSE STATEMENTS 1. Traditional costing systems use multiple predetermined overhead rates. 2. Traditionally, overhead is allocated based on direct labor cost or direct labor hours. 3. Current trends in manufacturing include less direct labor and more overhead. 4. Activity-based costing allocates overhead to multiple cost pools and assigns the cost pools to products using cost drivers. 5. A cost driver does not generally have a direct cause-effect relationship with the resources consumed. 6. The first step in activity-based costing is to assign overhead costs to products, using cost drivers. 7. To achieve accurate costing, a high degree of correlation must exist between the cost driver and the actual consumption of the activity cost pool. 8. Low-volume products often require more special handling than high-volume products. 9. When overhead is properly assigned in ABC, it will usually decrease the unit cost of high- volume products. 10. ABC leads to enhanced control over overhead costs. 11. ABC usually results in less appropriate management decisions. 12. ABC is generally more costly to implement than traditional costing. 13. ABC eliminates all arbitrary cost allocations. 14. ABC is particularly useful when product lines differ greatly in volume and manufacturing complexity. 15. ABC is particularly useful when overhead costs are an insignificant portion of total costs. 16. Activity-based management focuses on reducing costs and improving processes. 17. Any activity that increases the cost of producing a product is a value-added activity. 18. Engineering design is a value-added activity. 19. Nonvalue-added activities increase the cost of a product but not its market value. 20. Machining is a nonvalue-added activity. 21. Not all activities labeled nonvalue-added are totally wasteful, nor can they be totally
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Test Bank for Managerial Accounting, Second Edition eliminated. 22. The overall objective of installing ABC in service firms is no different than it is in a manufacturing company. 23. What sometimes makes implementation of activity-based costing difficult in service industries is that a smaller proportion of overhead costs are company-wide costs. 24. The general approach to identifying activities, activity cost pools, and cost drivers is used by a service company in the same manner as a manufacturing company. 25. Inventory storage costs are reduced in just-in-time processing. 26. Rework costs typically increase in just-in-time processing. 27. Just-in-time strives to eliminate inventories by using a pull approach. 28. Quality control is less important in just-in-time than in traditional manufacturing philosophies. *29. Plant management is a batch-level activity. *30. Painting is a product-level activity. Answers to True-False Statements Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans.
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This note was uploaded on 03/19/2012 for the course ACCT 2102 taught by Professor Constable,d during the Spring '08 term at Georgia Perimeter.

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22806855-Activity-Based-Costing - ACTIVITY-BASED COSTING...

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