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Financial Reporting: Activity-Based Costing

1. Match the descriptions below with the appropriate phrase or term: Answers may be used more than once.

1.) Bar-Coding system B
2.) Value-Added Activity _____
3.) Activity-Based Management _____
4.) Activity-Based Costing _____
5.) Non-value-added Activity FC
6.) Pilot project E

(a.) Shipping units to final customer
(b.) Marks and tracks all orders electronically
(c.) Multiple layers of approval
(d.) Spreadsheet function to help in analysis of value added activities
(e.) Small scale model of limited scope
(f.) Producing to build inventory
(g.) Evaluates costs and values of process activities to identify opportunities for improved efficiency
(h.)New ABC approach at American Airlines
(i.) Focuses on understanding how resources are used in current processes

3. Which of the following statements regarding cost allocations is False?

A) Organizations might implement multiple cost pools when uses of service departments have both facility and unit level components.
B) Using more cost pools should result in cost allocations that match resource use better than using fewer cost pools.
C) All resources consumed in the organization should be allocated to service departments, regardless of whether service departments use the resources or not.

4. Which of the following should be maximized when allocating a scarce resource among various production alternatives?

A) Gross margin per unit.
B) Contribution margin per unit.
C) Contribution margin per unit of scarce resource.
D) Sales volume.

5. What are characteristics of information used in decision making?

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1. Match the descriptions below with the appropriate phrase or term: Answers may be used more than once.

1.) Bar-Coding system B
2.) Value-Added Activity H
3.) Activity-Based Management G
4.) Activity-Based Costing I
5.) Non-value-added Activity FC
6.) Pilot project E

(a.) Shipping units to final customer
(b.) Marks and tracks all orders electronically
(c.) Multiple layers of approval
(d.) Spreadsheet function to help in analysis of value added activities
(e.) Small scale model of limited scope
(f.) Producing to build inventory
(g.) Evaluates costs and values of process activities to identify ...

Solution Summary

Cost allocation is explained.

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