Question 1

Customer-level activities are also referred to as customer-sustaining activities.

Accepted Answer

- Product-level activities are also referred to as product-sustaining activities,

Question 2

In an activity-based costing system,the benefits of defining more detailed activities will always outweigh the effort needed to monitor activity performance,and the resulting potential for error.

Accepted Answer

While defining more detailed activities can provide more accuracy in assigning costs, it also requires more effort and resources to monitor and track the performance of those activities. Additionally, there is a potential for error if the activity data is not collected accurately. Therefore, there is a trade-off between the benefits of detailed activities and the costs involved in monitoring and potential for error.

Question 3

With activity-based costing,the goal is to develop a product cost that captures the amount of each resource consumed by the activities performed to produce a specific product.

Accepted Answer

Activity-based costing (ABC) seeks to assign the precise amount of cost to a product or service by identifying the specific activities involved in the production process and the resources required to perform those activities. ABC recognizes that not all products consume resources in the same way, and therefore, the cost of producing each product must be estimated based on its unique characteristics.

Question 4

For unit-level activities, the total level of activity performed varies proportionately with the number of units produced.

Accepted Answer

Unit-level activities are directly related to the production of each unit, so as the number of units produced increases or decreases, the total activity level changes in direct proportion.

Question 5

A simple ABC model can have fewer than 20 activities; a complex model may include up to 100 activities,but no more.

Accepted Answer

This statement is not necessarily true or false. The number of activities in an ABC model depends on the complexity of the organization and the level of granularity desired in the analysis. Some simple models may have only a handful of activities, while complex models may have hundreds or even thousands of activities. Therefore, the statement is too narrow to be considered true or false.

Question 6

Activity-based costing is a costing technique that assigns costs to cost objects such as products or customers,based on the activities those cost objects require.

Accepted Answer

Activity-based costing is a costing technique that assigns costs to cost objects based on the activities those cost objects require. This technique helps in identifying the activities that add value to the final product and those that do not, allowing for more accurate cost allocation and better decision-making.

Question 7

In an activity-based costing system, after the manufacturing overhead costs have been assigned to activity cost pools, the next step is to calculate the unit product cost.

Accepted Answer

The answer of In an activity-based costing system, after the...

Question 8

Organizational-level activities provide identifiable benefits to specific products or services.

Accepted Answer

Organizational-level activities do not provide identifiable benefits to specific products or services.They are required to provide productive capacity and to keep the business in operation,

Question 9

An activity-based analysis that focuses only on manufacturing overhead improves GAAP-based financial statements.

Accepted Answer

An activity-based analysis that focuses only on manufacturing overhead does not improve GAAP-based financial statements,

Question 10

Even when direct materials and direct labor comprise the majority of product costs,manufacturing overhead allocation is still a major issue.

Accepted Answer

- When direct materials and direct labor comprise the majority of product costs, manufacturing overhead allocation is not a major issue,

Question 11

Identifying the activities performed in the organization is the most time consuming part of implementing an activity-based costing system.

Accepted Answer

Identifying the activities and their associated cost drivers is the most critical and time-consuming part of implementing an activity-based costing system as it requires a thorough understanding of the organization's processes and operations.

Question 12

In an activity-based costing system,a critical question to ask during activity identification is,"How important is this activity to the overall strategy of the organization?"

Accepted Answer

A critical question to ask during activity identification is, "What level of detail does the company want to collect?",

Question 13

Calculating the direct materials and direct labor cost that have been incurred to produce a product or deliver a service is a relatively complex process.

Accepted Answer

Calculating the direct materials and direct labor cost that have been incurred to produce a product or deliver a service is a relatively simple,

Question 14

In an activity-based costing system,after all the activities have been identified and the appropriate level of detail selected,the activities are combined into activity cost pools based on their cost drivers.

Accepted Answer

This is true. After identifying the activities and selecting the appropriate level of detail, they are combined into activity cost pools based on their cost drivers. This allows for more accurate allocation of costs to specific products or services.

Question 15

The first step in developing activity-based product costs is to develop activity cost pools.

Accepted Answer

The first step in developing activity-based product costs is to identify the activities performed in the organization,

Question 16

Product-level activities are also referred to as product-sustaining activities.

Accepted Answer

Product-level activities are those activities that support individual products or services, such as product design, engineering, and packaging. These activities are also known as product-sustaining activities, as they help sustain the production and delivery of the product over its lifetime.

Question 17

Under activity-based costing, selling and administrative costs should be allocated to products if they are incurred to provide resources that are consumed by unit-level, batch-level, or product-level activities.

Accepted Answer

Selling and administrative costs should be allocated to products if they are incurred to provide resources that are consumed by those products. This is the basic premise of activity-based costing.

Question 18

First-stage allocation is the process of assigning manufacturing overhead costs to activity pools.

Accepted Answer

First-stage allocation is the process of assigning manufacturing overhead costs to activity pools before allocating them to individual products or jobs in the second stage.

Question 19

In an activity-based costing system,the greater the level of detail the company wants to collect,the greater the chance of misclassifying some costs and activities.

Accepted Answer

The more detailed the activity-based costing system is, the greater the risk of misclassifying costs and activities due to the complexity of the system. Each activity and cost must be carefully evaluated and assigned to the appropriate cost pool and cost driver, which can be a time-consuming and potentially error-prone process. Therefore, companies must strive to strike a balance between collecting enough detail to provide meaningful insights and minimizing the risk of misclassification.

Question 20

Customer-level activities and the resources consumed to perform them do not affect product costs.

Accepted Answer

The answer of Customer-level activities and the resources consumed to...

Quiz 7: Activity-Based Costing and Activity Based Management