Current trends in manufacturing include less direct labor and more overhead.

Answers to True-False StatementsItem Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans.1. F 6. F 11. F 16. T 21. T 26. F2. T 7. T 12. T 17. F 22. T 27. T3. T 8. T 13. F 18. T 23. F 28. FTraditional costing systems use multiple predetermined overhead rates.2. Traditionally, overhead is allocated based on direct labor cost or direct labor hours.3. Current trends in manufacturing include less direct labor and more overhead.4. Activity-based costing allocates overhead to multiple cost pools and assigns the costpools to products using cost drivers.5. A cost driver does not generally have a direct cause-effect relationship with the resourcesconsumed.6. The first step in activity-based costing is to assign overhead costs to products, using costdrivers.7. To achieve accurate costing, a high degree of correlation must exist between the costdriver and the actual consumption of the activity cost pool.8. Low-volume products often require more special handling than high-volume products.

9. When overhead is properly assigned in ABC, it will usually decrease the unit cost ofhighvolumeproducts.10. ABC leads to enhanced control over overhead costs.11. ABC usually results in less appropriate management decisions.12. ABC is generally more costly to implement than traditional costing.13. ABC eliminates all arbitrary cost allocations.14. ABC is particularly useful when product lines differ greatly in volume and manufacturingcomplexity.15. ABC is particularly useful when overhead costs are an insignificant portion of total costs.16. Activity-based management focuses on reducing costs and improving processes.17. Any activity that increases the cost of producing a product is a value-added activity.18. Engineering design is a value-added activity.19. Nonvalue-added activities increase the cost of a product but not its market value.20. Machining is a nonvalue-added activity.21. Not all activities labeled nonvalue-added are totally wasteful, nor can they be totallyTest Bank for Managerial Accounting, Second Editioneliminated.22. The overall objective of installing ABC in service firms is no different than it is in amanufacturing company.23. What sometimes makes implementation of activity-based costing difficult in serviceindustries is that a smaller proportion of overhead costs are company-wide costs.24. The general approach to identifying activities, activity cost pools, and cost drivers is usedby a service company in the same manner as a manufacturing company.25. Inventory storage costs are reduced in just-in-time processing.26. Rework costs typically increase in just-in-time processing.27. Just-in-time strives to eliminate inventories by using a pull approach.28. Quality control is less important in just-in-time than in traditional manufacturingphilosophies.*29. Plant management is a batch-level activity.*30. Painting is a product-level activity.2. T 7. T 12. T 17. F 22. T 27. T

3. T 8. T 13. F 18. T 23. F 28. F

Current trends in manufacturing include less direct labour and more overhead.TrueFalse

A cost driver does NOTgenerally have a direct cause-effect relationship with the resourcesconsumed.

To achieve accurate costing, a high degree of correlation must exist between the cost driver andthe actual consumption of the activity cost pool.

Low-volume products often require more special handling than high-volume products.

FalseABC eliminates all arbitrary cost allocations.TrueFalseABC is particularly useful when overhead costs are an insignificant portion of total costs.

Engineering design is a value-added activity.

Machining is a non-value-added activity.

Not all activities labelled non-value-added are totally wasteful, nor can they be totally eliminated.

The overall objective of installing ABC in service firms is no different than it is in a manufacturingcompany.TrueFalse

Which of the following is typical of traditional costing systems?

It is more complicated than Activity Based Costing systems.Is still the best way to allocate direct labour costs.Uses a single cost driver to allocate overhead.A cost driver isany factor or activity that has a direct cause-effect relationship with the resources consumed.always based on time consumed by the activity.another name for cost pool.a term used only in traditional costing systems.In companies where there is good reason to change from a traditionally-based costing system to anactivity-based costing system, management might expectproducts or services with high volumes will have higher overhead costs.products or services with high volumes will have lowered overhead costs.products or services with low volumes will have lowered overhead costs.products or services with high volumes are generally costed accurately.A well designed activity-based costing system starts withidentifying the activity-cost pools.

computing the activity-based overhead rate.assigning manufacturing overhead costs for each activity cost pool to products.analyzing the activities performed to manufacture a product.

What is included in manufacturing overhead?

Which document shows the cost of direct materials direct labor and overhead applied for each specific job?

Which of the following is not an example of manufacturing overhead?

Is any factor or activity that has a direct cause effect relationship with the resources consumed?