Fundamentals Of Cost Accounting (6th Edition)
6th Edition
ISBN: 9781259969478
Author: WILLIAM LANEN, Shannon Anderson, Michael Maher
Publisher: McGraw Hill Education
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Chapter 9, Problem 28CADQ
One of the issues we identified with traditional costing systems is that all costs are allocated using volume-related drivers, such as direct labor-hours. How is time-driven ABC, which relies on minutes, different?
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Which of the following statements about time-driven activity-based costing is true?
a.
Time-driven ABC requires estimates of only two items, namely: the cost per time unit of supplying resource capacity, and unit times of consumption of resource capacity by products, services or customers
b.
Time-driven ABC is a simplification of traditional ABC. Due to this simplification, time-driven ABC is unable to adequately capture the complexity of real world operations
c.
With time-driven ABC, managers assign resource costs to each activity and then to products or customers rather than directly estimating the resource demands required by each product
d.
Survey evidence has revealed that ABC adoption rates are fairly low due to oversimplification and perceived inaccuracies. As a result, a more complex approach called time-driven ABC was implemented in order to overcome the perceived inaccuracies
e.
None of the available statements are true
Which of the following is false about activity-based costing?
Implementing an activity-based costing system is more costly than implementing a traditional cost allocation system.
In ABC, the assumption is that activities use resources or cause costs.
An activity-based costing system relies only on volume measures such as direct labor hours to allocate all overhead costs to products.
A traditional cost allocation system and an activity-based costing system are used to estimate the profitability of products.
"Activity-based costing does a better job of allocating both direct and indirect cost than traditional methods do.” Is this statement true, false, or uncertain?
Chapter 9 Solutions
Fundamentals Of Cost Accounting (6th Edition)
Ch. 9 - Give examples of cost drivers commonly used to...Ch. 9 - What is the death spiral? How is it related to the...Ch. 9 - The product costs reported using either plantwide...Ch. 9 - Why do companies commonly use direct labor-hours...Ch. 9 - What are the costs of moving to an activity-based...Ch. 9 - What are the basic steps in computing costs using...Ch. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - What type of organization is most likely to...Ch. 9 - Prob. 10RQ
Ch. 9 - How does complexity lead to higher costs? Why is...Ch. 9 - Prob. 12RQCh. 9 - Prob. 13RQCh. 9 - Why are cost drivers based on direct labor widely...Ch. 9 - Prob. 15CADQCh. 9 - Activity-based costing could not be applied in a...Ch. 9 - Activity-based costing is the same as department...Ch. 9 - Prob. 18CADQCh. 9 - It is clear after reading this chapter that...Ch. 9 - Prob. 20CADQCh. 9 - Prob. 21CADQCh. 9 - Prob. 22CADQCh. 9 - Prob. 23CADQCh. 9 - Activity-based costing is just another inventory...Ch. 9 - Prob. 25CADQCh. 9 - Prob. 26CADQCh. 9 - Prob. 27CADQCh. 9 - One of the issues we identified with traditional...Ch. 9 - The cost accounting manager at your business says...Ch. 9 - Prob. 30CADQCh. 9 - Prob. 31ECh. 9 - Reported Costs and Decisions Kima Company...Ch. 9 - Plantwide versus Department Allocation Munoz...Ch. 9 - Plantwide versus Department Allocation Main Street...Ch. 9 - Unitwide versus Department...Ch. 9 - Prob. 36ECh. 9 - Prob. 37ECh. 9 - Upriver currently applies overhead on the basis of...Ch. 9 - Compute the unit costs for the two products, V-1...Ch. 9 - Prob. 40ECh. 9 - Prob. 41ECh. 9 - Activity-Based Costing in a Nonmanufacturing...Ch. 9 - Activity-Based versus Traditional Costing Maglie...Ch. 9 - Activity-Based Costing versus Traditional Costing...Ch. 9 - Activity-Based Costing in a Service Environment...Ch. 9 - Activity-Based versus Traditional Costing Isadores...Ch. 9 - Prob. 47ECh. 9 - Activity-Based Costing: Cost Flows through...Ch. 9 - Prob. 49ECh. 9 - Activity-Based Costing for an Administrative...Ch. 9 - Prob. 51ECh. 9 - Time-Driven Activity-Based Costing Kim...Ch. 9 - Time-Driven ABC for an Administrative Service The...Ch. 9 - Comparative Income Statements and Management...Ch. 9 - Comparative Income Statements and Management...Ch. 9 - Prob. 56PCh. 9 - Activity-Based Costing and Predetermined Overhead...Ch. 9 - Activity-Based Costing and Predetermined Overhead...Ch. 9 - Choosing an Activity-Based Costing System Pickle...Ch. 9 - Churchill Products is considering updating its...Ch. 9 - Utica Manufacturing (UM) was recently acquired by...Ch. 9 - Cain Components manufactures and distributes...Ch. 9 - Prob. 63PCh. 9 - Prob. 64PCh. 9 - Prob. 65PCh. 9 - Cawker Products has two manufacturing...Ch. 9 - MTI makes three types of lawn tractors: M3100,...Ch. 9 - Prob. 68PCh. 9 - Prob. 69PCh. 9 - Prob. 72IC
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- When is an activity-based costing system better than a traditional allocation system?arrow_forwardIn Traditional product costing systems, the measure of product activity is usually some volume based cost driver, like direct labor hours. True or False?arrow_forwardWhich of the following best defines standard costing? a. It is the same as actual costing but done in real time. b. It is a system that allocates overhead costs on the basis of standard overhead rates times the actual quantities of the allocation base used. c. It is a system that traces direct costs to output produced by multiplying the standard prices or rates by the standard quantities of inputs allowed for the actual output produced. d. It is a system that traces direct cost to output by multiplying actual prices or rates by actual quantities of inputs and allocates overhead costs on the basis of actual quantities of the allocation base used.arrow_forward
- Since overhead costs are indirect costs, Group of answer choices they require some process of allocation. they can be easily traced to production. they cannot be allocated. a predetermined overhead rate is not advantageous.arrow_forwardWhat is time-driven activity based management (TDABC)? How is it different from activity based costing (ABC) & why would TDABC be used instead of ABC?arrow_forwardWhich of the following statements regarding activity-based costing (ABC) is NOT correct? a. Under ABC cost centres are replaced by cost pools b. Blanket overhead recovery rates (OAR) are replaced with cost driver rates c. ABC uses one common overhead recovery rate, such as labour hours. d. ABC tackles the problems of absorption costing by adopting a much more accurate way of charging overhead to cost units.arrow_forward
- Which of the following statements is true of ABC systems? A) ABC systems are time-driven cost systems. B) ABC systems classify some direct costs as indirect costs and some indirect costs as direct costs. C) ABC systems provide valuable information to managers beyond accurate product costs. D) ABC systems assume all costs are variable costs.arrow_forwardDiscuss how traditional methods of allocating overhead to products may not provide a good measure of overhead resources used. How might activity based costing overcome these limitations?arrow_forwardWhich of the following statement about Activity Based Costing is true? a) Costs which change with respect to the same activity will be in the same cost pool b) Total set-up cost is an example of a cost driver c) Cost pools group costs according to whether they are fixed or variable d) Activity based costing will produce one overall weighted average absorption ratearrow_forward
- Which of the following statements is true of activity-based costing? O a. ABC ignores the allocation of storage costs. O b. Activities are the cost objects of the second stage of ABC. Ос. An activity cost pool collects costs related to the same activity. O d. ABC is more likely to result in big differences from a traditional costing system if the business makes only one product rather than multiple products.arrow_forwardDescribe the characteristics of products which would suggest it would be better to use ABC as an indirect cost allocation method over a traditional method such as direct labor hours.arrow_forwardIn your own words, explain the difference between absorption costing and variable costing methods. How does each treat fixed manufacturing overhead? Provide an example and calculate the unit product cost using each method.arrow_forward
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