Question 1

Benchmarks can come from within the organization, from competing organizations, or from other organizations having similar products.

Accepted Answer

Benchmarks can come from various sources including within the organization, from competing organizations, or from other organizations having similar products. This helps organizations in measuring their performance against others and setting targets for improvement.

Question 2

Traditional costing systems work well with complex production and operating systems.

Accepted Answer

Traditional costing systems tend to work well with simple production and operating systems, whereas they can be inaccurate and misleading for complex systems.

Question 3

If ending finished goods inventory is larger than beginning finished goods inventory, then cost of goods sold is less than the sum of direct materials + direct labor + overhead.

Accepted Answer

When ending finished goods inventory is larger than beginning finished goods inventory, it indicates that not all goods produced were sold. Therefore, the cost of goods sold (COGS) would only include the cost of the goods that were actually sold, which could be less than the total production costs (sum of direct materials, direct labor, and overhead) for the period.

Question 4

Benchmarking is the continuous process of comparing products, services, and activities to the average industry standards.

Accepted Answer

Benchmarking involves comparing one's business processes and performance metrics to industry bests and best practices from other companies, not just to average industry standards. It aims for continuous improvement but focuses on achieving higher standards rather than just meeting the average.

Question 5

Collecting relevant data concerning costs and the physical flow of the cost-driver units among resources and activities is the third step of design of an ABC system.

Accepted Answer

This statement is true. The third step of designing an ABC system is collecting relevant data about the physical flow of cost-driver units among resources and activities, as well as the costs associated with each resource and activity. This data is then used to create cost pools and allocate costs to products or services based on their consumption of resources and activities.

Question 6

Costs included in work-in-process inventory are direct material, direct labor, and administrative.

Accepted Answer

Costs included in work-in-process inventory are direct material, direct labor, and manufacturing overhead, not administrative costs. Administrative costs are considered period costs and are not included in product costs.

Question 7

Traditional cost systems generally allocate only indirect production costs to the products.

Accepted Answer

Traditional cost systems typically allocate indirect production costs, such as overhead costs, to products. Direct costs, such as labor and materials, are usually assigned to specific products or services.

Question 8

_____ need aggregate rather than detailed cost information.
A)External users
B)Internal users
C)Both internal and external users
D)Neither internal nor external users

Accepted Answer

External users, such as investors and creditors, typically need aggregate cost information to assess the overall financial health of a company and its ability to pay off debts and generate returns, rather than detailed cost breakdowns. Internal users, such as managers, may require both aggregate and detailed cost information for decision making.

Question 9

Having only one cost driver is acceptable when indirect manufacturing costs are very large as compared to total costs.

Accepted Answer

Having only one cost driver may oversimplify the allocation of indirect costs, especially when those costs are significant. Multiple cost drivers ensure a more accurate and fair distribution of costs to different products or services.

Question 10

Handling and storing inventories and transporting finished goods from one part of the plant to another are examples of non-value-added activities.

Accepted Answer

Non-value-added activities are activities that do not directly contribute to the production or delivery of a product or service but are necessary for the overall operation of the business. Handling and storing inventories and transporting finished goods are necessary but do not add value to the product itself.

Question 11

Cost drivers are usually expressed in dollars.

Accepted Answer

Cost drivers are typically measured in terms of units of activity or volume, such as machine hours, labor hours, or number of setups, rather than in dollars.

Question 12

Value-added costs are not necessary.

Accepted Answer

Value-added costs refer to costs incurred to add value to a product or service. These costs are necessary in order to improve the quality, functionality, or customer satisfaction of the product or service. Therefore, the statement is false.

Question 13

The finished goods inventory account is only found on the balance sheet.

Accepted Answer

The finished goods inventory account is reported on the balance sheet under current assets, but changes in its value are also reflected in the cost of goods sold on the income statement.

Question 14

Determining the key components of the Activity-Based Cost system is the first step of design of an ABC system.

Accepted Answer

Determining the key components of the Activity-Based Cost system is indeed the first step in designing an ABC system. This involves identifying the activities that consume resources and the cost drivers that cause those activities, as well as developing a cost hierarchy to categorize costs according to the level of activity they relate to.

Question 15

A value-added cost is the cost of an activity that a company cannot eliminate without affecting a product's value to the customer.

Accepted Answer

A value-added cost is defined as a cost that adds value to a product or service and cannot be eliminated without affecting its quality or perceived value to the customer. Examples of value-added costs include research and development, quality control, and customer service. Non-value-added costs, on the other hand, are costs that do not add value to a product or service from the customer's perspective and can be eliminated without affecting its quality or performance.

Question 16

A reason that more organizations in manufacturing and nonmanufacturing industries are adopting activity-based costing systems is that new production techniques have decreased the proportion of indirect costs.

Accepted Answer

Activity-based costing systems are adopted by organizations in manufacturing and nonmanufacturing industries to accurately allocate indirect costs to products or services. The adoption of new production techniques may reduce the proportion of direct costs, but it does not necessarily reduce the proportion of indirect costs.

Question 17

Determining the relationships among cost objects, activities, and resources is the second step of design of an ABC system.

Accepted Answer

This statement is true. Determining the relationships among cost objects (such as products or customers), activities (such as machine setup or quality control), and resources (such as labor or materials) is a crucial step in designing an activity-based costing system. This helps to identify the drivers of activity costs and assign those costs more accurately to the appropriate cost objects.

Question 18

A cost pool is a group of individual costs that is allocated to cost objectives using a single cost driver.

Accepted Answer

A cost pool is a collection of costs that are related to a specific activity or product, and these costs are allocated to cost objectives (such as products, services, or departments) using a single cost driver.

Question 19

Companies try to maximize non-value-added costs.

Accepted Answer

Companies try to minimize non-value-added costs as they are considered unnecessary expenses that do not add value to the end product or service.

Question 20

Activity?based accounting is a system that first accumulates overhead costs for each of the activities of an organization, and then assigns the costs of activities to the products, services, or other cost objects that caused that activity.

Accepted Answer

Activity-based accounting is a costing system that identifies and assigns costs to activities, and then assigns those costs to products, services, or other cost objects based on their use of those activities.

Quiz 4: Cost Management Systems and an Introduction to Activity-Based Costing