ACC 241 Exam 2 ASU Dallmus
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departmental overhead allocation - ANSWER - this kind of overheard rate increases
the accuracy of job costs when each department incurs different types and amounts
of manufacturing overhead and each product, or job, uses the departments to a
different extent
formula: total estimated departmental overhead cost pool/total estimated amount
of the departmental allocation base
steps of activity based costing - ANSWER - 1.Identify the activities and estimate the
manufacturing overhead costs of each activity
2.Select the allocation base for each activity and estimate the total amount that will
be used during the year
3.Compute cost allocation rate for each activity : Estimated total indirect costs of
activity /Estimated total quantity of cost allocation base
4. Allocate some manufacturing overhead from each activity to the individual cost
object
What are the four categories of activity costs in the cost hierarchy? - ANSWER - 1:
Unit-Level Activities
2: Batch-Level Activities
3: Product-Level Activities
4: Facility-Level Activities
What are Unit-Level Activities? - ANSWER - -Activities and costs incurred for every
unit-Ex: Inspecting/packaging each unit the company produces
What are Batch-Level Activities? - ANSWER - -Activities/costs incurred for every
batch, regardless of the number of units in the batch-Ex: Machine Setup --> Once
the machines are set up to be used in production, the company could produce a
, batch of 1, 10, or 100 units, while still only incurring the machine setup cost once
for the entire batch
What are Product-Level Activities? - ANSWER - -Activities and costs incurred for a
particular product, regardless of the number of units or batches of the product
produced-Ex: The cost to research, develop, design, and market new models
just-in-time inventory system - ANSWER - a system designed to ensure that
materials or supplies arrive at a facility just when they are needed so that storage
and holding costs are minimized
Total Quality Management (TQM) - ANSWER - A management philosophy of
delighting customers with superior products and services by continually setting
higher goals and improving the performance of every business function.
(Cost of quality categories &
Cost of quality reporting)
What are Facility-Level Activities? - ANSWER - -Activities and costs incurred no
matter how many units, batches, or products are produced in the plant-Ex: Facility
upkeep --> The cost of depreciation, insurance, property tax, and maintenance on
the entire production plant
activity based management - ANSWER - a management approach that focuses on
managing activities as a way of eliminating waste and reducing delays and defects
-refers to the use of activity-based cost information to make decisions that increase
profits while satisfying customer needs
What are value-added activities? - ANSWER - Activities for which the customer is
willing to pay because these activities add value to the final product
What are non-value-added activities? - ANSWER - Activities that neither enhance the
customer's image of the product nor provide a competitive advantage
Benefits of adopting activity-based costing - ANSWER - - significant amounts of
indirect costs are allocated using only one or two cost pools.
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