Question 1

Discretionary activities are necessary to comply with legal mandates.

Accepted Answer

Discretionary activities are activities that are not necessary or required by law.

Question 2

Product diversity means that products consume manufacturing overhead activities in systematically similar proportions.

Accepted Answer

Product diversity means that products consume manufacturing overhead activities in different, and often varied, proportions. This can result in some products absorbing more overhead costs than others, and can impact the costing and pricing of products.

Question 3

Activity analysis is the effort expended to identify those factors that are the root causes of activity costs.

Accepted Answer

False

Question 4

Costs that are caused by the inefficient performance of value-added activities are non-value-added costs.

Accepted Answer

Non-value-added costs are costs that do not directly contribute to the creation of value for the customer. Inefficient performance of value-added activities can lead to additional costs, such as rework or excessive inventory, which are considered non-value-added costs.

Question 5

The value-added standard is the waste-free component of the value-added activity.

Accepted Answer

The value-added standard refers to the process of adding value to a product or service through a series of activities that do not create waste. Therefore, it can be considered the waste-free component of the value-added activity.

Question 6

One of the questions answered by activity analysis should be "What activities are done?"

Accepted Answer

Activity analysis aims to identify and describe the various activities that are done within a particular role, task, or process. Therefore, one of the central questions that activity analysis should answer is "What activities are done?"

Question 7

Activities necessary to remain in business are called value-added activities.

Accepted Answer

Value-added activities are defined as activities or processes that contribute to the production or delivery of a product or service, and are necessary to remain in business. These activities add value to the final product or service, and may include design, production, marketing, sales, and customer service activities.

Question 8

Unit-level activities are performed each time a batch is produced.

Accepted Answer

Unit-level activities are activities that are performed on each individual unit of the product, regardless of the size of the batch produced. These activities do not depend on the batch size and are performed regardless of how many units are produced in a batch. Examples of unit-level activities include assembling components and inspecting each unit for quality control.

Question 9

Activity drivers should be classified as either internal or external.

Accepted Answer

The answer of Activity drivers should be classified as either...

Question 10

An activity dictionary lists the activities in an organization along with some critical activity attributes.

Accepted Answer

An activity dictionary is a document that lists all the activities that take place within an organization along with their attributes such as activity name, description, inputs, outputs, resources required, and responsible personnel. It is an essential tool for project management and process improvement.

Question 11

The consumption ratio is the amount of each activity consumed by all products.

Accepted Answer

The consumption ratio is the amount of each product consumed by a particular activity, not the other way around.

Question 12

To calculate an activity rate, the practical capacity of each activity must be determined.

Accepted Answer

To calculate an activity rate, we need to know the practical capacity of the activity.

Question 13

An activity-based costing system first traces costs to activities and then to products.

Accepted Answer

Activity-based costing (ABC) system follows a two-stage process for cost allocation. Firstly, costs are assigned to activities and then activities are assigned to products based on their usage. This approach provides a more accurate measurement of product cost compared to traditional costing methods.

Question 14

Factors that measure the consumption of activities by products and other cost objects are value-added costs.

Accepted Answer

Value-added costs are costs that are necessary for producing a product or providing a service, and that can be directly linked to the product or service. Factors that measure the consumption of activities by products and other cost objects are typically referred to as cost drivers.

Question 15

Efficiency is the reciprocal of cycle time.

Accepted Answer

Efficiency is calculated as the ratio of actual output to standard output, while cycle time is the total time required to complete a process from start to finish. They are not reciprocals of each other.

Question 16

Activity input measure is the result or product of an activity.

Accepted Answer

Activity input measure refers to the resources or efforts put into an activity, not the result or product of the activity.

Question 17

A work distribution matrix is derived from an interview or a written survey.

Accepted Answer

A work distribution matrix is typically derived from an interview or written survey in order to assess and distribute tasks and responsibilities within a team or organization.

Question 18

Resource drivers are factors that measure the consumption of resources by activities.

Accepted Answer

Resource drivers are indeed factors that measure the consumption of resources by activities. This information is then used in activity-based costing to assign costs to products, services or customers based on the resources used.

Question 19

Activity attributes are financial and nonfinancial information items that describe individual activities.

Accepted Answer

Activity attributes are indeed financial and nonfinancial information items that describe individual activities. Examples of activity attributes include the cost of the activity, the time required to complete it, and the resources needed.

Question 20

A volume-based costing system tends to be allocation-intensive.

Accepted Answer

Volume-based costing systems allocate costs based on volume measures such as units produced or machine hours used. This requires a lot of effort to identify and allocate costs to individual products or services. Therefore, volume-based costing systems tend to be allocation-intensive.

Quiz 7: Activity-Based Costing and Management