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Cost Accounting

William Carter

Chapter 14

ABC - all with Video Answers

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Chapter Questions

04:48

Problem 1

In terms of the direct traceability of costs, how do traditional costing systems differ from $\mathrm{ABC}$ ?

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02:03

Problem 1

In what way does $\mathrm{ABC}$ lead to improved decisions in designing a product?

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Problem 2

What role is played by activities in assigning costs to products using $\mathrm{ABC}$ ? How does this differ from traditional costing?

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Problem 3

Give some examples of significant, costly activities.

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Problem 4

What two circumstances must be present for a traditional costing system to report distorted product costs?

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04:48

Problem 5

What is meant by a complex cost structure in $\mathrm{ABC}$ ?

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Problem 6

What is meant by a diverse product line in $\mathrm{ABC}$ ?

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05:54

Problem 7

Name the four levels of costs and drivers in ABC.

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Ameer Said
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Problem 8

State as briefly as possible how traditional costing distorts the reported cost of a product that consumes $10 \%$ of all unit-level activities and $30 \%$ of all batch-level activities.

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Problem 9

When both low- and high-volume products are produced in a company using traditional costing, which kind of product is likely to have its cost distorted by the largest percentage? In which direction will its cost be distorted?

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02:11

Problem 10

Of the four levels of costs in ABC, at which level does ABC offer little or no advantage over traditional costing?

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Problem 11

Contribution margin (CM) analysis is a short-run decision-making technique that recognizes many of $A B C$ 's batch-level and product-level costs as fixed, while $A B C$ treats these costs as being essentially variable. How is this difference between $A B C$ and $C M$ explained?

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Problem 12

If $\mathrm{ABC}$ shows a product to be a money-loser and management discontinues that product, will the cost of the product reported by ABC necessarily be avoided? Why or why not?

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Problem 13

What is the relationship between activity-based costing (ABC) and activity-based management $(\mathrm{ABM})$ ?

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Problem 14

What aspect of $A B M$ follows directly from $A B C$ 's revision of product costs?

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Problem 15

What specific information from $A B C$ sometimes leads management to focus on the need to improve a process?

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Problem 17

What is the link between $\mathrm{ABC}$ and total quality management?

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