ASSI GN M EN T M ATERI AL QUESTIONS

Q5-1 Wh at is th e pu rpose of a cost accou n tin g system ? Q5-2 “A cost pool is a grou p of costs th at is ph ysically traced to th e appropri-

ate cost objective.” Do you agree? Explain . Q5-3 Give five term s th at are som etim es u sed as su bstitu tes for th e term “allo-

cate.” Q5-4 Wh at are th e th ree pu rposes of cost allocation ? Q5-5 Wh at are th e th ree types of allocation s? Q5-6 Give th ree gu ides for th e allocation of service departm en t costs. Q5-7 Wh y sh ou ld bu dgeted-cost rates, rath er th an actu al-cost rates, be u sed

for assign in g th e variable costs of service departm en ts? Q5-8 Wh y do m an y com pan ies allocate fixed costs separately from vari-

able costs?

Q5-9

“We u sed a lu m p-su m allocation m eth od for fixed costs a few years ago, bu t we gave it u p becau se m an agers always predicted u sage below wh at th ey actu ally u sed.” Is th is a com m on problem ? How m igh t it be preven ted?

Q5-10 “A com m on ly m isu sed basis for allocation is dollar sales.” Explain . Q5-11 How cou ld n ation al advertisin g costs be allocated to territories? Q5-12 Briefly describe th e two popu lar m eth ods for allocatin g service-

departm en t costs. Q5-13 “Th e step-down m eth od allocates m ore costs to th e produ cin g depart- m en ts th an does th e direct m eth od.” Do you agree? Explain . Q5-14 How does th e term cost application differ from cost allocation ? Q5-15 Wh at is a n on -volu m e-related cost driver? Give two exam ples. Q5-16 How are costs of variou s overh ead resou rces allocated to produ cts, ser-

vices, or cu stom ers in an ABC system ? Q5-17 Briefly explain each of th e two con ven tion al ways of allocatin g join t

costs to produ cts. Q5-18 Wh at are by-produ cts an d h ow do we accou n t for th em ? Q5-19 Give fou r exam ples of activities an d related cost drivers th at can be u sed

in an ABC system to allocate costs to produ cts, series, or cu stom ers.

Chapter 5 Cost Allocation and Activity-Based Costing Systems

Q5-20 “Activity-based costin g is u sefu l for produ ct costin g bu t n ot for plan n in g

an d con trol.” Do you agree? Explain . Q5-21 Refer to Exhibit 5-6. Suppose the appliance maker has two plants—the Salem plant and the Youngstown plant. The Youngstown plant produces only three appliances that are very similar in material and production requirements. The Salem plant produces a wide variety of appliances with diverse material and production requirements. Which type of costing system would you recommend for each plant (traditional or ABC)? Explain.

Q5-22 Nam e fou r steps in th e design an d im plem en tation of an activity-based

costin g system . Q5-23 Refer to th e Pacific Power illu stration . Wh ich resou rce costs depicted in

Exh ibit 5-7 cou ld h ave variable cost beh aviou r? Q5-24 Wh y do organ ization s adopt activity-based costin g system s? Q5-25 Wh y do m an agers wan t to distin gu ish between valu e-added activities

an d n on -valu e-added activities? Q5-26 Name four factors crucial to the success of just-in-time production systems. Q5-27 “ABC an d JIT are altern ative tech n iqu es for ach ievin g com petitiven ess.”

Do you agree?

ASSI GN M EN T M ATERI AL QUESTIONS