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ACTIVITY-BASED COSTING AND ACTIVITY-BASED MANAGEMENT

ACTIVITY-BASED COSTING AND ACTIVITY-BASED MANAGEMENT -...

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CHAPTER 5 ACTIVITY-BASED COSTING AND ACTIVITY-BASED MANAGEMENT TRUE/FALSE 1. Companies that undercost products will most likely lose market share. 2. When refining a costing system, a company should classify as many costs as possible as indirect costs. 3. Indirect labor and distribution costs would most likely be in the same activity-cost pool. 4. Activity-based costing helps identify various activities that explain why costs are incurred. 5. Traditional systems are likely to undercost complex products with lower production volume. 6. For activity-based cost systems, activity costs are assigned to products in the proportion of the demand they place on activity resources. 7. Misleading cost numbers are larger when unit-level assignments and the alternative activity-cost-driver assignments are proportionately similar to each other. 8. Information derived from an ABC analysis might be used to eliminate nonvalue- added activities. 9. Department-costing systems are a further refinement of ABC systems. 10. Simply because activity-based costing systems employ more activity-cost drivers, they provide more accurate product costs than traditional systems. MULTIPLE CHOICE 11. Overcosting of a product is MOST likely to result from: a. misallocating direct labor costs b. overpricing the product c. undercosting another product d. understating total product costs 12. The use of a single indirect-cost rate is more likely to: 5-1
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13. Uniformly assigning the costs of resources to cost objects when those resources are actually used in a nonuniform way is called: 14. Refining a cost system includes: 15. Traditional cost systems distort 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 5-2
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16. Which of the following statements about activity-based costing is NOT true?
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