Chapter 17 Review

True or False: Traditional costing systems use multiple overhead rates.

• True

• False

True or False: A cost driver generally has a direct cause-effect relationship with the resources consumed.

• True

• False

True or False: ABC usually results in less appropriate management decisions.

• True

• False

True or False: ABC is generally more expensive to implement than traditional costing.

• True

• False

True or False: When using traditional costing, overhead is assigned based on direct labor hours or direct labor costs.

• True

• False

True or False: Non-value-added activities increase the cost of the product, but not the perceived value to the customer.

• True

• False

True or False: The overall objective of using ABC in a service firm is the same as it is in a manufacturer.

• True

• False

True or False: Inventory storage costs are reduced in just-in-time processing.

• True

• False

An activity that has a direct cause-effect relationship with the resources consumed is a(n):

• Cost Driver

• Overhead Rate

• Cost Pool

• Product Activity

Which of the following is a limitation of Activity-Based Costing?

• More cost pools

• More accurate overhead costs assigned

• ABC is expensive and difficult to implement

• Poor management decisions