ACC 241 Exam 2 ASU Dallmus
Questions & Answers 100% Correct!!
departmental overhead allocation - ANSWERSthis 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 - ANSWERS1.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? - ANSWERS1: Unit-
Level Activities
2: Batch-Level Activities
3: Product-Level Activities
4: Facility-Level Activities
What are Unit-Level Activities? - ANSWERS-Activities and costs incurred for every unit-
Ex: Inspecting/packaging each unit the company produces
What are Batch-Level Activities? - ANSWERS-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? - ANSWERS-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? - ANSWERS-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 - ANSWERSa 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? - ANSWERSActivities for which the customer is willing
to pay because these activities add value to the final product
What are non-value-added activities? - ANSWERSActivities that neither enhance the
customer's image of the product nor provide a competitive advantage
Benefits of adopting activity-based costing - ANSWERS- 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.
Lean Production System - ANSWERSproduction system designed for smooth
production flows that avoid inefficiencies, eliminate unnecessary inventories, and
continuously improve production processes
traditional production system - ANSWERS-keep large inventories on hand
-problems:
--storage cost
-hide quality
-bottlenecks and obsolete products
-solution:
Lean productions system
just-in-time inventory system - ANSWERSa system designed to ensure that materials or
supplies arrive at a facility just when they are needed so that storage and holding costs
are minimized
Total Quality Management (TQM) - ANSWERSA management philosophy of delighting
customers with superior products and services by continually setting higher goals and
improving the performance of every business function.
(Cost of quality categories &
Cost of quality reporting)
Cost of Quality Categories - ANSWERSprevention costs, appraisal costs, internal failure
costs, external failure costs
Questions & Answers 100% Correct!!
departmental overhead allocation - ANSWERSthis 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 - ANSWERS1.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? - ANSWERS1: Unit-
Level Activities
2: Batch-Level Activities
3: Product-Level Activities
4: Facility-Level Activities
What are Unit-Level Activities? - ANSWERS-Activities and costs incurred for every unit-
Ex: Inspecting/packaging each unit the company produces
What are Batch-Level Activities? - ANSWERS-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? - ANSWERS-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? - ANSWERS-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 - ANSWERSa 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? - ANSWERSActivities for which the customer is willing
to pay because these activities add value to the final product
What are non-value-added activities? - ANSWERSActivities that neither enhance the
customer's image of the product nor provide a competitive advantage
Benefits of adopting activity-based costing - ANSWERS- 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.
Lean Production System - ANSWERSproduction system designed for smooth
production flows that avoid inefficiencies, eliminate unnecessary inventories, and
continuously improve production processes
traditional production system - ANSWERS-keep large inventories on hand
-problems:
--storage cost
-hide quality
-bottlenecks and obsolete products
-solution:
Lean productions system
just-in-time inventory system - ANSWERSa system designed to ensure that materials or
supplies arrive at a facility just when they are needed so that storage and holding costs
are minimized
Total Quality Management (TQM) - ANSWERSA management philosophy of delighting
customers with superior products and services by continually setting higher goals and
improving the performance of every business function.
(Cost of quality categories &
Cost of quality reporting)
Cost of Quality Categories - ANSWERSprevention costs, appraisal costs, internal failure
costs, external failure costs
