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Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Chapter 5, Problem 23E
To determine
Identify the correct option from the given situation.
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Which of the following is most likely to be true of the manufacturing overhead costs assigned to a product
with relatively low volume and high complexity?
O a. An ABC system will assign the same manufacturing overhead costs to the product as a volume-
based system.
O b. Avolume-based system will assign more manufacturing overhead costs to the product than an ABC
system.
O c. An ABC system will assign more manufacturing overhead costs to the product than a volume-based
system.
O d. An ABC system will assign manufacturing overhead costs to the product, while a volume-based
system will not.
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What system would a manufacturer of unique special orders or batch processes most likely use to accumulate costs?
a .process costing
b. variable costing
c. job-order costing
d. contract costing
Which 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.
Chapter 5 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 5 - What is cost measurement? Cost accumulation? What...Ch. 5 - Why is actual costing rarely used for product...Ch. 5 - Explain the differences between job-order costing...Ch. 5 - What are some differences between a manual...Ch. 5 - Prob. 5DQCh. 5 - How do firms collect job-related information on...Ch. 5 - Explain the role of activity drivers in assigning...Ch. 5 - Define the following terms: expected actual...Ch. 5 - Why would some prefer normal activity to expected...Ch. 5 - When using normal costing, how are jobs charged...
Ch. 5 - Wilson Company has a predetermined overhead rate...Ch. 5 - Why are the accounting requirements for job-order...Ch. 5 - Explain the difference between normal cost of...Ch. 5 - Amber Company produces custom framing. For one...Ch. 5 - Amber Company produces custom framing. For one...Ch. 5 - Naranjo Company designs industrial prototypes for...Ch. 5 - Naranjo Company designs industrial prototypes for...Ch. 5 - Heitger Company is a job-order costing firm that...Ch. 5 - Frieling Company installs granite countertops in...Ch. 5 - Frieling Company installs granite countertops in...Ch. 5 - Prob. 6ECh. 5 - Vince Melders, of EcoScape Company, designs and...Ch. 5 - Refer to the data in Exercise 5.7. Vince Melders,...Ch. 5 - Reggie Wilmore has just started a new...Ch. 5 - Reggie Wilmore has just started a new...Ch. 5 - During March, Aragon Company worked on three jobs....Ch. 5 - Job Cost On April 1, Sangvikar Company had the...Ch. 5 - Job Cost On April 1, Sangvikar Company had the...Ch. 5 - On August 1, Cairle Companys work-in-process...Ch. 5 - On August 1, Cairle Companys work-in-process...Ch. 5 - Ehrling Brothers Company makes jobs to customer...Ch. 5 - During August, Skyler Company worked on three...Ch. 5 - Feldspar Company uses an ABC system to apply...Ch. 5 - Kapoor Company uses job-order costing. During...Ch. 5 - Salazar Company is a job-order costing firm that...Ch. 5 - Lorrimer Company has a job-order cost system. The...Ch. 5 - CleanCom Company specializes in cleaning...Ch. 5 - Prob. 23ECh. 5 - Geneva, Inc., makes two products, X and Y, that...Ch. 5 - Prob. 25ECh. 5 - During May, the following transactions were...Ch. 5 - Firenza Company manufactures specialty tools to...Ch. 5 - Prob. 28PCh. 5 - Cherise Ortega, marketing manager for Romer...Ch. 5 - Lieu Company is a specialty print shop. Usually,...Ch. 5 - Warrens Sporting Goods Store sells a variety of...Ch. 5 - Sutton Construction Inc. is a privately held,...Ch. 5 - Dr. Alyx Hemmings is employed by Mesa Dental. Mesa...Ch. 5 - Prob. 34P
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Similar questions
- Which is not a task typically associated with ABC systems? A. calculating the overhead application rate for each cost pool B. applying a single cost rate C. identifying a cost driver D. more correctly allocating overhead costsarrow_forwardExplain how a plantwide overhead rate, using a unit-based driver, can produce distorted product costs. In your answer, identify two major factors that impair the ability of plantwide rates to assign cost accurately.arrow_forwardWhat is the proper order of tasks In an ABC system? identify the cost drivers, assign the costs to the products, calculate the overhead application rate for each cost pool, identify the cost pools assign the costs to the products, identify the cost drivers, calculate the overhead application rate for each cost pool, identify the cost pools identify the cost drivers, identify the cost pools, calculate the overhead application rate for each cost pool, assign the costs to the products identify the cost pools, identify the cost drivers, calculate the overhead application rate for each cost pool, assign the costs to the productsarrow_forward
- Activity-based costing is preferable in a system: when multiple products have similar product volumes and costs with a large direct labor cost as a percentage of the total product cost with multiple, diverse products where management needs to support an increase in sales pricearrow_forwardOf the following systems, which one is most likely to reduce cost distortion to a minimum? Traditional costing system Departmental overhead allocation rates Plantwide overhead rate Activity-based costingarrow_forwardWhich of the following is a benefit of activity-based cost management system? a.It makes it easy to identify the overall activities that bear an influence on cost. b.It is inexpensive. c.It enhances strategic planning. d.It ensures allocation of all costs on the basis of machine hours.arrow_forward
- In order to determine product costs, JIT firms are usually structured so they can use: a.joint costing b.process costing c.variable costing d.job-order costingarrow_forwardWhat is the proper order of tasks in an ABC system? a.identify the cost pools, identify the cost drivers, calculate the overhead application rate for each cost pool, assign the costs to the products b.assign the costs to the products, identify the cost drivers, calculate the overhead application rate for each cost pool, identify the cost pools c.identify the cost drivers, identify the cost pools, calculate the overhead application rate for each cost pool, assign the costs to the products d.identify the cost drivers, assign the costs to the products, calculate the overhead application rate for each cost pool, identify the cost poolsarrow_forwardIndicate whether the following statement is true or false, then support your view. By using a single cost pool and a single cost driver to allocate overhead, the more traditional methods of overhead assignment fully considers the influence on cost of the different activities that occur to make a product.arrow_forward
- Which of the following statements about overhead allocation based on volume alone is correct? Select one: a. It will systematically overcost high-volume products and undercost low-volume products. b. It must be used for external financial reporting. c. It will systematically overcost low-volume products and undercost high-volume products. d. It is a key aspect of the activity-based costing model.arrow_forwardWhich of the following statements is true? When designing an activity-based costing system, related activities are frequently combined to reduce the amount of detail and record-keeping cost. Activity-based costing uses a number of activity cost pools, each of which is allocated to products on the basis of direct labor-hours. Activity-based costing involves a two-stage allocation process in which overhead costs are first assigned to activity cost pools and then allocated to products using activity measures. The challenge in designing an activity-based costing system is to identify all of the activities that explain the variation in overhead costs. Statements I, II, and III are true. Statements I and III are true. All of the statements are true. Statements II and III are true.arrow_forwardWhich of the following is NOT true about a resource cost driver under Activity based costing? O a. Sales orders are used to assign the cost of machines O b. Resource cost driver is used to assign the cost of the resource to an activity OC. Number of purchased orders placed will determine the cost of purchasing the materials O d. Number of times machines are set up will determine their cost of setting uparrow_forward
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