Activity Based Costing(Quick Test)

1. In a conventional or traditional costing system, the manufacturing overhead costs were often assigned to products on the basis of __________ __________ hours or dollars, or on production machine hours.

2. The ABC system assumes that resources are consumed or are caused by __________.

3. In a modern production facility with a diversity of products, the allocation of manufacturing overhead on the basis of production machine hours is not likely to reflect a __________-and-effect relationship.

4. Rather than merely spreading manufacturing costs to products, ABC attempts to assign the costs based on their root __________.

5. An extension of ABC is ABM, the acronym for activity-based__________.

6. Product complexities cause __________, which in turn cause costs.

7. The second stage of an ABC system usually assigns the accumulated costs in stage 1 to a product or service by using an activity cost __________.

8. Activity-based costing systems will use __________ cost drivers than a traditional costing system.

9. Traditional or conventional costing systems usually assign__________ overhead to products.

10. Traditional costing systems generally assign manufacturing overhead costs to products in proportion to the __________ of production.

11. In the past 50 years, manufacturing overhead costs have generally__________ as a percentage of a product’s manufacturing cost.

12. Under a traditional or conventional costing system, products with small production runs and which require special handling would likely be assigned too __________ manufacturing overhead.

13. Activity-based costing systems will likely have __________ cost pools than traditional/conventional costing systems.

14. ABC systems improve the allocation of __________costs when compared to traditional/conventional costing systems.

15. Which of the following would be the best driver of the costs associated with setting up a production machine in a job shop?

16. When a manufacturer’s products vary in complexity, its more complex products are generally assigned too little manufacturing overhead costs under __________ __________ costing system.

17. Machine setup labor.

18. Traditional costing systems generally assign manufacturing overhead costs on this basis.

19. Security services for the factory.

20. Material handling labor.

21. Often referred to as “volume related.”

22. Design and engineering the product lines.

23. Operating the production equipment.

24. Inspecting the first items of a production run.

25. Salaries of the corporation’s CEO and CFO.

26. Machine hours would be a valid cost driver for this.

27. Maintaining the bills of material.

28. Lighting and heating of the factory.

29. Least likely to be assigned to products.

30. Electricity to operate the assembly line.

31. Depreciation on the factory building.

32. Under traditional costing where the $800,000 is applied on 20,000 machine hours, the overhead costs assigned to a product that required one production run of 16,000 units and required 1,000 machine hours will be $__________ per unit of product.

33. Under traditional costing where the $800,000 is applied on 20,000 machine hours, the overhead costs assigned to a product that required one production run of 1,500 units and required 90 machine hours will be $__________ per unit of product.

34. Using activity based costing, the manufacturing overhead costs related to setup and production are assigned as follows:

• Setup costs are assigned to products at $500 per batch ($100,000/200 setups)
• Other manufacturing overhead costs are assigned to products at $35 per MH ($700,000/20,000 MHs)

If there was only one setup for a production run of 16,000 units that required 1,000 MHs, the above manufacturing overhead costs will be assigned to the products using the per unit cost of $__________ (rounded to the nearest cent).

35. Using activity based costing, the manufacturing overhead costs related to setup and production are assigned as follows:

• Setup costs are assigned to products at $500 per batch ($100,000/200 setups)
• Other manufacturing overhead costs are assigned to products at $35 per MH ($700,000/20,000 MHs)

If there was only one setup for a production run of 1,500 units that required only 90 MHs, the above manufacturing overhead costs will be assigned to the products using the per unit cost of $__________ (rounded to the nearest cent).