2. A well designed activity-based costing system starts with

_________________________________________________

3. It requires a detailed, step-by-step review of each operation, documenting every activity undertaken to accomplish a task. At this point, the company will identify activity cost pools such as _____________________________________________

4. Next, the system assigns overhead costs directly to the appropriate activity cost pools identified in step #3.

1. After costs are allocated to the activity cost pools, the company must _____________________________________________

2. A high degree of correlation must exist between the cost driver and the actual consumption of the overhead costs in the cost pool to achieve ________________

3. The company computes an activity-based overhead rate per cost driver by _____________________________________________

4. In allocating overhead costs, the company _____________________________________________________

5. The company multiplies _______________________________ by __________ to be used per product to assign overhead costs to each product.

6. Under ABC, overhead costs are usually shifted from __________ _______________________. This shift results in more accurate costing because:

2. Companies may achieve greater accuracy in overhead cost allocation by ____________________________________________________

3. Nonrecognition of this classification of activities is one of the reasons that volume-based cost allocation causes ____________________.

4. _________________________________________________ do not vary at the unit level, nor can managers control them at the unit level.

5. Companies can control batch-, product-, and facility-level costs only by ____________________________________

G. Value-Added Versus Non-Value-Added Activities.

1. Value-added activities increase _______________________.

3. Value-added activities are __________________________ _________________________________________________

4. Non-value-added activities are ________________________ _________________________________________________

5. Companies often use activity flowcharts to help ___________

6. Not all non-value-added activities are totally wasteful, nor can they be totally eliminated, but managers are motivated to ________________________________

1. The overall objective of ABC in service firms is no different than it is for a manufacturing company: The objective is to identify _____________ ______________________________________________________

Often, a larger proportion of overhead costs are company-wide costs

that cannot be directly traced to specific services provided by the company, which sometimes makes implementation of ABC _________________