Exercise 2 Listed below are several terms relating to activity-based costing: Process value analysis Plantwide overhead rate Facility level Low volume High volume Batch level Activity centers Two stage Product level Unit level Volume Stage Choose the term or terms above that most appropriately complete the following statements. The terms can be used more than once. (Note that a blank can hold out more than one word.) 1. A single overhead rate used throughout an entire plant operation is known as a 298 Chapter 9 2. The major problem with using direct labor-hours or machine-hours as the basis for assigning overhead cost to products is that these bases rely on as the sole factor in overhead cost assignment. allocation process, 3. Activity-based costing involves a in which the first assigns overhead costs to activity centers and the second assigns overhead costs from activity centers to products and services. which involves a systematic analysis of the activities required to make a product or perform a service, is the beginning point in activity-based costing. S. activities, such as the consumption of power, are performed each time a unit is produced and arise as a result of the total volume of production going through a facility. 6. activities, which are performed each time a batch of goods is handled or processed, include tasks such as placement of a purchase order 7. activities, which are performed as needed to support the production of a particular product, include tasks such as maintaining parts inventories. 8. activities just sustain a facility's general manufacturing process and include items such as insurance or general factory management. 9. The use of activity-based costing often causes a shift in overhead costs from products to products, thereby causing the unit cost of the increase products to sharply 10. One of the benefits of activity-based costing is that it increases the number of cost pools, or used to accumulate and assign overhead costs to products and services