ACC 241 Exam 2 ASU Dallmus

ACC 241 Exam 2 ASU Dallmus Questions and Answers 100% Verified

Question: What is departmental overhead allocation?

Correct answer: This kind of overhead 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

Question: What are the steps of activity-based costing?

Correct answer: 1. Identify the activities and estimate the

manufacturing overhead costs of each activity

• 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

• Allocate some manufacturing overhead from each activity

to the individual cost object

Question: What are the four categories of activity costs in the

cost hierarchy?

Correct answer: 1. Unit-Level Activities

• Batch-Level Activities
• Product-Level Activities
• Facility-Level Activities

Question: What are Unit-Level Activities?

Correct answer: Activities and costs incurred for every unit.

Example: Inspecting/packaging each unit the company

produces

Question: What are Batch-Level Activities?

Correct answer: Activities/costs incurred for every batch,

regardless of the number of units in the batch. Example:

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

Question: 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. Example: The cost to research, develop,

design, and market new models

Question: What are Facility-Level Activities?

Correct answer: Activities and costs incurred no matter how

many units, batches, or products are produced in the plant.

Example: Facility upkeep -- The cost of depreciation,

insurance, property tax, and maintenance on the entire production plant

Question: What is 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

Question: 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

Question: What are non-value-added activities?

Correct answer: Activities that neither enhance the customer's

image of the product nor provide a competitive advantage

Question: What are the 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.