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CA Chapter 9
| Question | Answer |
|---|---|
| Process that begins by attempting to increase price to meet reported product costs, losing demand, reporting still higher costs, and so on until the firm is out of business. | Death Spiral(book) |
| Allocation method that uses one cost pool for the entire plant by using one overhead allocation rate, or one set of rates, for all of a plant's departments. | Plantwide Allocation Method (book) |
| Allocation method that has a separate cost pool for each department, which has its own overhead allocation rate or set of rates. | Department Allocation Method (book) |
| Costing method that first assigns costs to activities and then assigns them to products based on the products; consumption of activities. | Activity-based Costing (ABC) (book) |
| Factor that causes, or "drives," and activity's costs. | Cost Driver (book) |
| Classification of cost drivers into general levels of activity, e.g., volume, batch, product. | Cost Hierarchy (book) |
| Process that begins by attempting to increase price to meet reported product costs,losing demand,reporting still higher costs,and so on until the firm is out of business.Begins with:Lower economic activity,Recession,Change in tastes,Even with^demand? | Death Spiral(PP) |
| Allocation method that uses one cost pool for the entire plant by using one overhead allocation rate, or one set of rates, for all of a plant's departments. Used in manufacturing and nonmanufacturing. Simple to use. Usually based on a volume of output. | Plantwide Allocation Method (PP) |
| Allocation method that has a separate cost pool for each department, which has its own overhead allocation rate or set of rates. More complicated. Uses separate allocation rates. | Department Allocation Method (PP) |
| An approach for allocating Overhead cost to activities, then to products based on consumption of activities. | ABC (PP) |
| Any discrete task that an organization undertakes to make or deliver a product or service. | Activity (PP) |
| The overhead cost attributed to a distinct type of activity. | Activity Cost Pool (PP) |
| Any factor or activity that has a direct cause-effect relationship with the resources consumed. | Cost Driver (PP) |
| Classification of cost drivers into general levels of activity. Volume, batch, product, etc. | Cost Hierarchy (PP) |
| Identify and classify the major activities. Identify the cost driver. Compute the overhead rate for each cost driver. Assign manufacturing overhead costs for each cost pool. | Steps in ABC (PP) |
| Primary benefit: more accurate product costing. More cost pools. Enhanced control over overhead costs. Better management decisions. | Benefit of ABC (PP) |
| Expensive to use. Arbitrary allocations continue. | Limitations of ABC (PP) |
| Presence of one or more of the following:Product lines differ greatly in volume and man. complexity. Product lines are numerous and diverse, require diff. degrees of support services. OH costs constitute a significant portion of total costs. | When to use ABC 1 (PP) |
| Presence of one or more of the following: Man. process or the number of products has changed significantly. Production or marketing managers are ignoring data provided by the existing system. | When to use ABC 2 (PP) |
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