1. ACC 350 WK 6 Quiz 4 Chapter 5
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1)
A top-selling product might actually result in losses for the company.
Answer:
2)
Companies that undercost products will most likely lose market share.
Answer:
3)
If companies increase market share in a given product line because their reported costs are less than
their actual costs, they will become more profitable in the long run.
Answer:
4)
As product diversity and indirect costs increase, it is usually best to switch away from an activity based
cost system to a broad averaging system.
Answer:
5)
If a company undercosts one of its products, then it will overcost at least one of its other products.
Answer:
6)
Direct costs plus indirect costs equal total costs.
Answer:

2. 7)
When refining a costing system, a company should classify as many costs as possible as indirect costs.
Answer:
8)
In a homogeneous cost pool, all costs have a similar cause-and-effect relationship with the cost-
allocation base.
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9)
Indirect labor and distribution costs would most likely be in the same activity-cost pool.
Answer:
10)
Activity-based costing helps identify various activities that explain why costs are incurred.
Answer:
11)
Direct tracing of costs improves cost accuracy.
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12)
A cost-allocation base is a necessary element when using a strategy that will refine a costing system.
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13)
An activity-based costing system is necessary for costing services that are similar.
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3. 14)
Traditional systems are likely to undercost complex products with lower production volume.
Answer:
15)
For activity-based cost systems, activity costs are assigned to products in the proportion of the demand
they place on activity resources.
Answer:
16)
Unit-level measures can distort product costing because the demand for overhead resources may be
driven by batch-level or product-sustaining activities.
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17)
Output unit-level costs cannot be determined unless you know how many units are in a given batch.
Answer:
18)
Using multiple unit-level cost drivers generally constitutes an effective activity-based cost system.
Answer:
19)
Misleading cost numbers are larger when unit-level assignments and the alternative activity-cost-driver
assignments are proportionately similar to each other.
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20)
Availability of reliable data and measures should be considered when choosing a cost-allocation base.
Answer:

4. 21)
When designing a costing system, it is easiest to calculate total costs first, and then per-unit costs.
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22)
ABC systems attempt to trace more costs as direct costs.
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23)
ABC systems create homogeneous cost pools linked to different activities.
Answer:
24)
ABC systems seek a cost allocation base that has a cause-and-effect relationship with costs in the cost
pool.
Answer:
25)
For service organizations, activity-based cost systems may be used to clarify appropriate cost
assignments.
Answer:
26)
ABC reveals opportunities for improving the way work is done.
Answer:
27)
Activity-based management refers to the use of information derived from ABC analysis to analyze and

5. improve operations.
Answer:
28)
Information derived from an ABC analysis might be used to eliminate nonvalue-added activities.
Answer:
29)
ABC costing systems are primarily for use in manufacturing and marketing and not for design
engineering.
Answer:
30)
Department-costing systems are a further refinement of ABC systems.
Answer:
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assignment 1 Cost Accounting and Management Decisions