Acc 350 Quiz 3 Study

Front 1

Overhead rate =

Back 1

Budgeted annual overhead/Budgeted annual driver level

Front 2

Unit-based product costing assigns

Back 2

only manufacturing costs to products

Front 3

A cost system that uses predetermined overhead rates and
actual costs for direct materials and direct labor is referred to as a

Back 3

normal cost system

Front 4

Unit-level activities are activities performed each and every time a unit of a product is produced. The five most commonly used unit-level drivers are:

Back 4

1 . Units produced
2. Direct labor hours
3. Direct labor dollars
4. Machine hours
5. Direct material dollars

Front 5

Unit-level drivers __ as units produced increase

Back 5

increase

Front 6

the use of only unit-based drivers to assign overhead costs to products assumes that

Back 6

all overhead consumed by products is highly correlated with the number of units produced

Front 7

The total over-head assigned to actual production at any point in time is called

Back 7

applied overhead

Front 8

Applied overhead =

Back 8

Overhead rate × Actual driver usage

Front 9

a plantwide rate is computed using a single unit-level driver, which is usually

Back 9

direct labor hours

Front 10

The difference between actual over-head and applied overhead is an

Back 10

overhead variance

Front 11

If actual overhead is greater than
applied overhead, then the variance is called

Back 11

underapplied overhead

Front 12

An overhead variance is disposed of in one of two ways (because overhead must be accurately reflected in the financial statements, so we must adjust somehow):
.

Back 12

1 . If immaterial, it is assigned to cost of goods sold.
2. If material, it is allocated among work-in-process inventory, finished goods
inventory, and cost of goods sold

Front 13

Product diversity simply means that products consume overhead activities

Back 13

in different proportions

Front 14

If the process to make butterfingers is much longer than the process to make M&M's, what factor here may cause cost distortions?

Back 14

product diversity

Front 15

The proportion of each activity consumed by a product is defined as the

Back 15

consumption ratio

Front 16

instead of pooling the overhead costs in plant or departmental pools, rates are calculated for

Back 16

each individual overhead activity

Front 17

When ABC costing is useful:

Back 17

1. when there are multiple products AND product diversity
2. non-unit-level overhead must be a significant percentage of production cost

Front 18

an activity-based costing (ABC) system first traces costs to
__ and then to __

Back 18

activities, products and other cost objects

Front 19

Steps for ABC system (6):

Back 19

1. Identify, define, and classify activities and key attributes.
2. Assign the cost of resources to activities.
3. Assign the cost of secondary activities to primary activities.
4. Identify cost objects and specify the amount of each activity consumed by specific
cost objects.
5. Calculate primary activity rates.
6. Assign activity costs to cost objects.

Front 20

___ is an activity that is consumed by a final cost object such as a product
or customer

Back 20

primary activity

Front 21

___ is one that is consumed by intermediate cost objects such as primary activities, materials, or other secondary activities

Back 21

secondary activity

Front 22

A product with a high gross profit could be an unprofitable product due to

Back 22

high selling and admin costs that are not included in COGS

Front 23

means of gathering data for an ABC system:

Back 23

Interviews, questionnaires, surveys, and observation

Front 24

__ are factors that measure the consumption of resources by activities

Back 24

Resource drivers

Front 25

__ measure the demands that cost objects place on activities.

Back 25

Activity drivers

Front 26

Most ABC system designs choose between one of two types of activity drivers:

Back 26

transaction drivers and duration drivers

Front 27

__ measure the number of times an activity is performed, such as the number of treatments and the number of requests.

Back 27

Transaction drivers

Front 28

__ measure the demands in terms of the time it takes to perform an activity, such as hours of hygienic care and monitoring hours

Back 28

Duration drivers

Front 29

__ activities are those that are performed each time a unit is produced

Back 29

Unit-level

Front 30

__ activities are those that are performed each time a batch
is produced. Setups, inspections (if done by sampling units from a batch), purchasing, and materials handling are examples

Back 30

Batch-level

Front 31

__ activities are those activities performed that enable the various products of a company to be produced. Engineering
changes (to products), developing product-testing procedures, introducing new products, and expediting goods are examples

Back 31

Product-level

Front 32

__ activities are those that sustain a factory’s general manufacturing processes. Providing buildings, maintaining grounds, and providing plant security are examples

Back 32

Facility-level

Front 33

Using only machine hours for assigning manufacturing overhead will likely result in too ___ costs for low volume products.

Back 33

few

Front 34

Who invented the ABC system?

Back 34

John Deere

Front 35

Examples of cost drivers:

Back 35

machine hours, number of setups, inspections (these are all ACTIVITIES)

Front 36

ABC costing attempts to take indirect costs and

Back 36

convert them to direct costs

Front 37

Low-volume products require more

Back 37

special handling (like machine setups and inspections), in theory