Concept Application Paper

10385 WordsApr 9, 201242 Pages
CHAPTER 4 ACTIVITY-BASED COST SYSTEMS TRUE/FALSE 1. Traditional cost systems use actual departments or cost centers for defining cost pools to accumulate and redistribute costs. a. True b. False 2. Activity-based cost systems use cost centers to accumulate costs. a. True b. False 3. Traditional cost systems are likely to undercost complex products with lower production volume. a. True b. False 4. The first step in designing an activity-based cost system is to develop an activity dictionary. a. True b. False 5. The Ericson’s Ice Cream Company case in the text provides an illustration of why factories producing a more varied mix of products have higher costs than factories…show more content…
a. True b. False 25. For service organizations, activity-based cost systems clarify appropriate cost assignments to products and customers and help to identify the profitability of various products and customers. a. True b. False 26. The most successful ABC projects occur when a clear business purpose exists for building the ABC model. a. True b. False 27. When the ABC system has a poor model design, ABC can still overcome the barriers to implementation and provide an effective system. a. True b. False 28. An activity-based costing system is meant to perform the role of operational control as well as to provide the basis for costing inventory for financial reporting. a. True b. False 29. Even when the ABC project is initiated from the finance group, a multifunctional project team should be formed. a. True b. False 30. Activity –based pricing prices orders, not products. a. True b. False MULTIPLE CHOICE 31. ________ and ________ are typically the measures of volume of activity in traditional volume-based cost systems. a. Practical capacity; products sold b. Direct labor hours; practical capacity c. Direct labor hours; machine hours d. Square footage; machine hours 32. Traditional cost systems distort product costs because: a. they do not know how to identify the appropriate units b. excess capacity
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