Ch05tif
CHAPTER 5
ACTIVITY-BASED COSTING AND ACTIVITY-BASED MANAGEMENT
TRUE/FALSE
1. A top-selling product might actually result in losses for the company.
Answer: True Difficulty: 2 Objective: 1 Terms to Learn: product undercosting
2. Companies that undercost products will most likely lose market share.
Answer: False Difficulty: 2 Objective: 1 Terms to Learn: product undercosting Companies that overcost products will most likely lose market share.
3. If a company undercosts one of its products, then it will overcost at least one of its other products.
Answer: True Difficulty: 2 Objective: 1 Terms to Learn: product-cost cross-subsidization
4. Direct costs plus indirect costs equal total costs.
Answer: True Difficulty: 1 Objective: 2 Terms to Learn: activity-based costing (ABC)
5. When refining a costing system, a company should classify as many costs as possible as indirect costs.
Answer: False Difficulty: 1 Objective: 2 Terms to Learn: refined costing system When refining a costing system, a company should classify as many costs as possible as direct costs.
6. In a homogeneous cost pool, all costs have a similar cause-and-effect relationship with the cost-allocation base.
Answer: True Difficulty: 1 Objective: 2 Terms to Learn: activity-based costing (ABC)
7. Indirect labor and distribution costs would most likely be in the same activity-cost pool.
Answer: False Difficulty: 2 Objective: 2 Terms to Learn: activity-based costing (ABC) Indirect labor and distribution costs would not be in the same activity-cost pool because their cost drivers are very dissimilar. A cost driver of indirect labor would include direct labor hours, while a cost driver of distribution costs would include, for example, cubic feet of cargo moved.
8. Activity-based costing helps identify various activities that explain why costs are incurred.
Answer: True Difficulty: 1 Objective: 2 Terms to Learn: activity-based costing (ABC)
9. Direct tracing of costs
ACTIVITY-BASED COSTING AND ACTIVITY-BASED MANAGEMENT
TRUE/FALSE
1. A top-selling product might actually result in losses for the company.
Answer: True Difficulty: 2 Objective: 1 Terms to Learn: product undercosting
2. Companies that undercost products will most likely lose market share.
Answer: False Difficulty: 2 Objective: 1 Terms to Learn: product undercosting Companies that overcost products will most likely lose market share.
3. If a company undercosts one of its products, then it will overcost at least one of its other products.
Answer: True Difficulty: 2 Objective: 1 Terms to Learn: product-cost cross-subsidization
4. Direct costs plus indirect costs equal total costs.
Answer: True Difficulty: 1 Objective: 2 Terms to Learn: activity-based costing (ABC)
5. When refining a costing system, a company should classify as many costs as possible as indirect costs.
Answer: False Difficulty: 1 Objective: 2 Terms to Learn: refined costing system When refining a costing system, a company should classify as many costs as possible as direct costs.
6. In a homogeneous cost pool, all costs have a similar cause-and-effect relationship with the cost-allocation base.
Answer: True Difficulty: 1 Objective: 2 Terms to Learn: activity-based costing (ABC)
7. Indirect labor and distribution costs would most likely be in the same activity-cost pool.
Answer: False Difficulty: 2 Objective: 2 Terms to Learn: activity-based costing (ABC) Indirect labor and distribution costs would not be in the same activity-cost pool because their cost drivers are very dissimilar. A cost driver of indirect labor would include direct labor hours, while a cost driver of distribution costs would include, for example, cubic feet of cargo moved.
8. Activity-based costing helps identify various activities that explain why costs are incurred.
Answer: True Difficulty: 1 Objective: 2 Terms to Learn: activity-based costing (ABC)
9. Direct tracing of costs