ACC 241 Exam 2 ASU Dallmus
questions with correct answers
departmental overhead allocation - correct answer ✔✔ this kind of overheard rate increases
the accuracy of job costs when each department incurs different types and amounts of
manufacturing overhead and each product, or job, uses the departments to a different extent
formula: total estimated departmental overhead cost pool/total estimated amount of the
departmental allocation base
steps of activity based costing - correct answer ✔✔ 1.Identify the activities and estimate the
manufacturing overhead costs of each activity
2.Select the allocation base for each activity and estimate the total amount that will be used
during the year
3.Compute cost allocation rate for each activity : Estimated total indirect costs of activity
/Estimated total quantity of cost allocation base
4. Allocate some manufacturing overhead from each activity to the individual cost object
What are the four categories of activity costs in the cost hierarchy? - correct answer ✔✔ 1: Unit-
Level Activities
2: Batch-Level Activities
3: Product-Level Activities
4: Facility-Level Activities
What are Unit-Level Activities? - correct answer ✔✔ -Activities and costs incurred for every
unit-Ex: Inspecting/packaging each unit the company produces
What are Batch-Level Activities? - correct answer ✔✔ -Activities/costs incurred for every batch,
regardless of the number of units in the batch-Ex: Machine Setup --> Once the machines are set
, up to be used in production, the company could produce a batch of 1, 10, or 100 units, while
still only incurring the machine setup cost once for the entire batch
What are Product-Level Activities? - correct answer ✔✔ -Activities and costs incurred for a
particular product, regardless of the number of units or batches of the product produced-Ex:
The cost to research, develop, design, and market new models
What are Facility-Level Activities? - correct answer ✔✔ -Activities and costs incurred no matter
how many units, batches, or products are produced in the plant-Ex: Facility upkeep --> The cost
of depreciation, insurance, property tax, and maintenance on the entire production plant
activity based management - correct answer ✔✔ a management approach that focuses on
managing activities as a way of eliminating waste and reducing delays and defects
-refers to the use of activity-based cost information to make decisions that increase profits while
satisfying customer needs
What are value-added activities? - correct answer ✔✔ Activities for which the customer is
willing to pay because these activities add value to the final product
What are non-value-added activities? - correct answer ✔✔ Activities that neither enhance the
customer's image of the product nor provide a competitive advantage
Benefits of adopting activity-based costing - correct answer ✔✔ - significant amounts of indirect
costs are allocated using only one or two cost pools.
- all or most indirect costs are identified as output unit-level costs.
- products make diverse demands on resources because of differences in volume, process steps,
batch size, or complexity
- products that a company is well suited to make and sell show small profits - operations staff
has substantial disagreement with the reported costs of manufacturing and marketing products
and services.
questions with correct answers
departmental overhead allocation - correct answer ✔✔ this kind of overheard rate increases
the accuracy of job costs when each department incurs different types and amounts of
manufacturing overhead and each product, or job, uses the departments to a different extent
formula: total estimated departmental overhead cost pool/total estimated amount of the
departmental allocation base
steps of activity based costing - correct answer ✔✔ 1.Identify the activities and estimate the
manufacturing overhead costs of each activity
2.Select the allocation base for each activity and estimate the total amount that will be used
during the year
3.Compute cost allocation rate for each activity : Estimated total indirect costs of activity
/Estimated total quantity of cost allocation base
4. Allocate some manufacturing overhead from each activity to the individual cost object
What are the four categories of activity costs in the cost hierarchy? - correct answer ✔✔ 1: Unit-
Level Activities
2: Batch-Level Activities
3: Product-Level Activities
4: Facility-Level Activities
What are Unit-Level Activities? - correct answer ✔✔ -Activities and costs incurred for every
unit-Ex: Inspecting/packaging each unit the company produces
What are Batch-Level Activities? - correct answer ✔✔ -Activities/costs incurred for every batch,
regardless of the number of units in the batch-Ex: Machine Setup --> Once the machines are set
, up to be used in production, the company could produce a batch of 1, 10, or 100 units, while
still only incurring the machine setup cost once for the entire batch
What are Product-Level Activities? - correct answer ✔✔ -Activities and costs incurred for a
particular product, regardless of the number of units or batches of the product produced-Ex:
The cost to research, develop, design, and market new models
What are Facility-Level Activities? - correct answer ✔✔ -Activities and costs incurred no matter
how many units, batches, or products are produced in the plant-Ex: Facility upkeep --> The cost
of depreciation, insurance, property tax, and maintenance on the entire production plant
activity based management - correct answer ✔✔ a management approach that focuses on
managing activities as a way of eliminating waste and reducing delays and defects
-refers to the use of activity-based cost information to make decisions that increase profits while
satisfying customer needs
What are value-added activities? - correct answer ✔✔ Activities for which the customer is
willing to pay because these activities add value to the final product
What are non-value-added activities? - correct answer ✔✔ Activities that neither enhance the
customer's image of the product nor provide a competitive advantage
Benefits of adopting activity-based costing - correct answer ✔✔ - significant amounts of indirect
costs are allocated using only one or two cost pools.
- all or most indirect costs are identified as output unit-level costs.
- products make diverse demands on resources because of differences in volume, process steps,
batch size, or complexity
- products that a company is well suited to make and sell show small profits - operations staff
has substantial disagreement with the reported costs of manufacturing and marketing products
and services.
