Ch 17 Review

What is the relevant activity base for traditional based costing? 

• Machine hours 

• Direct labor hours 

• Direct materials hours  

• Manufacturing hours 

What is an activity cost pool? 

• The total overhead cost in a company  

• An activity that has a cause-effect relationship with the resource consumed 

• The overhead cost attributed to a distinct activity 

• The overhead cost for a specific job 

What is an example of a cost driver? 

• Machining  

• Ordering materials 

• Factory supervising 

• Number of setups 

A low degree of correlation must exist between the cost driver and the cost pool. 

• true

• false

What is the formula for the activity-based overhead rate? 

• Est. total overhead cost / est. use of activity base 

• Est. overhead per activity / est. use of cost driver per activity 

• Actual overhead per activity / actual use of cost driver per activity 

• Actual total overhead cost / actual use of activity base 

If I calculated the ABC rate with machine hours, what should I multiply it by to find the applied overhead? 

• Actual machine setup 

• Estimated machine setup 

• Estimated machine hours 

• Actual machine hours 

If I produce a group of products at a time, what activity would that be considered?  

• Product-level 

• Batch-level 

• Unit-level 

• Facility-level 

An activity that does not add value to the product but increases costs and cannot be fully eliminated is a… 

• Valued activity  

• Non-value-added activity 

• Value-added activity 

• Bad activity 

Just-in-time (JIT) processing… 

• Lowers the risk of not having materials on hand (meaning there are always materials on hand) 

• Enhances product quality 

• Causes inventory build-up 

• Adds more costs 

Which of the following is not a benefit of ABC? 

• Employs more cost pools which results in more accurate product costing 

• Better control over overhead costs 

• More expensive to use 

• 4. Allows better management decisions