Chapter 4 DQ’s 1. Overhead costs are not directly related to production volume, therefore cannot be traced to units of product in the same way that DM and DL can.

2. Plantwide Rate, Departmental Rate, and Activity-Based Costing

3. These measures are usually readily available in most manufacturing settings and are closely related to volume-bases measures.

4. It is easier to use, only one rate to be allocated to all products.

5. Overhead costs are logically related to the base used to determine the rate and all costs are consumed by products in the same proportions.

6. A cost object is anything to which costs would be assigned. (Units of Product, Product Lines, Departments, Activities, and Projects.

7. If not all overhead costs are related to the base and if products consume resources in different proportions, some products will be assigned too much overhead costs and some too little.

8. Departmental Overhead Rates are more accurate because they reflect the costs of each driver in various departments. With a plantwide overhead rate, some important cost differences would be lost due to the lumping of all costs into one rate.

9. Departmental and Plantwide overhead rates can be similar in the fact that they pool together costs that could be incurred differently. They differ because the departmental rates recognize differences among departments and assign overhead to products based on the driver that makes the most sense for each department.

10. The company may need more accurate information for strategy, cost control and other managerial purposes.

11. The first step is to identify the activities that cause costs to be incurred and the cost pools.

12. An Activity Cost Drive is the measure of the activity that causes costs to be incurred.

13. Activities that add value to a product

14. Unit