SOLUTION MANUAL FOR FUNDAMENTALS
COST ACCOUNTING 24TH EDITION WILLIAM
LANEN ALL CHAPTERS A+ GUIDE COMPLETE
NEWEST VERSION 2026/2027 GRADED A+ TEST
BANK
9
Activity-Based Costing g
Solutions to Review Questions
g g g
9-1.
Commongallocationgbasesgaregdirectglabor-
hours,gdirectglaborgcosts,gandgmachinehours.gSomewhatglessgcommongisgdirectgmaterialgcosts.
9-2. Thegtermg“deathgspiral”grefersgtogagprocessgthatgbeginsgbygattemptinggtogincreasegpricesgto
gmeetgreportedgproductgcosts.gHighergpricesgreducegdemand,gleadinggtogproductiongandgst
illghighergreportedgproductgcosts.gEventually,gthegfirmglosesgproductsgasgthegmarketgwillgnot
gsupportgthemgandggoesgoutgofgbusiness.gThegdeathgspiralgisgnotgthegresultgofgthegcostgsyst
emgdirectly,gbutgthegresultgofgmanagersgmakinggdecisionsg(ingthisgcasegraisinggprices)gbas
edgongthegcostgsystemgthatgisg(oftenginaccurately)gsignalinggincreasedgcosts.
9-3.
False.gDepartmentgallocationgisgagtwo-
stagegprocess,gsogthegfirststagegassignmentgofgcostsgandgthegchoicegofgcostgdriversgaffectsgthegallocati
ongofgcostsgtog
products.gThegtotalgproductgcostsgaregthegsamegundergeithergapproach,gbutgthegindividualg
productgcostsgdiffer.gThisgcangaffectgthegdecisionsgmanagersgmakegregardinggindividualgpr oducts.
9-4.
Mostgcompaniesgproducegmultiplegproductsgandgsimplygaddinggthemgupgdoesgnotgaccount
gforgdifferencesgingcomplexitygof gthegusegofgresources.gAsgangextremegexample,gsupposega
gcompanygproducedgairplanesgandgstaplers.gAllocatinggoverheadgongthegbasisgofgunitsgwou
ldgassigngthegsamegoverheadgcostgtogagstaplergandgagplane.
,
,9-5.
Thegcostsgincludegthegsystemsgandgthegsoftware,gbutgthegmostgimportantgcostgisgmanagers
’gtime.gManagersgneedgtogmakegmanygdecisionsgaboutgthegactivitiesgandgthegcostgdriversga
ndgmanagersgneedgtogmakegmanygofgthegfirststagegallocations.gThegbenefitsgcomegfromghavinggbettergi
nformationgaboutgthegusegofgres ourcesgandgbetterginformationgforgdecisions.
Solutions gManual,gChapterg9 483
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9-6.
1. Identifygactivitiesgthatgconsumegresources.
2. Identifygthegcostgdrivergassociatedgwithgeachgactivity.
3. Computegagcostgrategpergactivitygunitg(e.g.,grategpergsetup,grategpergpart,grategperg
machine-hour).
4. Allocategcostsgtogproductsgbygmultiplyinggthegactivitygrategtimesgthegvolumegofgactivitygc
onsumedgbygthegproduct.
9-7.
Thegcostghierarchygisgagclassificationgofgcostsgintoggeneralglevelsgofgactivity.gCostsgassigne
dgtogthegdifferentglevelsgofgtheghierarchygtendgtogbegrelatedgtogthegvolumegofgthegactivitygvolu me.
9-8.
False.gWhilegthegtotalgcostgallocatedgisgthegsame,gthegreportedgcostsgforgindividualgproduct
sgwillgdiffer.gBecausegmanagersgmakegdecisionsgatgthegproductglevel,gitgisgimportantgthatgth
egreportedgcostsgreflect,gtogthegextentgpossible,gthegusegofgresourcesgbygthegproducts.
9-9.
Activity-
basedgcostinggwillgbenefitgmostgcompaniesgwithghighgoverheadgcostsgandgdiversegproductsg
andgprocesses.gIfgtheregisglittlegoverheadgorgifgtheregisgagsinglegproduct,gthegallocationgproce
ssgwillgnotgresultgingsignificantlygdifferentgproductgcosts.g(Evengifgtheregaregonlygagfew,grelativ
elyghomogeneousgproducts,gactivity-
basedgcostinggmaygbegusefulgforgcostgmanagement.gSeegchapterg10gforgagdiscussion.)
9-10.
Agpersonnelgdepartmentgprovidesgitsgservicesgbygcompletinggagsetgofgactivitiesgusinggreso
urces.gIngthisgway,gimplementinggactivitybasedgcostinggingangadministrativegfunctiongisgthegsamegasgim
plementinggitgingagmanufactu
,
,ringgfirm.gHowever,gthegproductsgandgactivitiesgmaygbegmuchghardergtogdefine,gmakinggitgl
essglikegagmanufacturinggenvironment.
9-11.
Complexitygaddsgcostsgbygrequiringgadditionalgresourcesgforgoverheadg(support)gactivitie
sgforgthegsamegvolume.gItgisgimportantgtogincludegcomplexitygingcostgsystemgdesignsgtogav
oidgspreadinggthegcostgofgcomplexitygacrossgbothgsimplegandgcomplexgproducts.
484 FundamentalsgofgCostgAccounting
Copyrightg2020g©gMcGraw-
,.
,
, Stuvia.com - The Marketplace to Buy and Sell your Study Material
9-12. Thegtwogquestionsgagmanagergmustganswergwhengimplementinggtime-
drivengactivitygbasedgcostinggareg(1)gwhatgisgthegcostgofgthegresourcesgsuppliedgtogagdepartme
ntgandg(2)g howgmuchgtimegitgtakesgtogcompletegthegvariousgactivitiesgofgthegdepartment.
9-13.
Timegequationsgallowgmanagersgtogadjustgthegtimegrequiredgforgactivitiesgforgselectedgcharacte
risticsgofgproductsgorgservices.
Solutions gManual,gChapterg9 485
Stuvia.com - The Marketplace to Buy and Sell your Study Material
Solutions to Critical Analysis and Discussion Questions
g g g g g g
9-14.
COST ACCOUNTING 24TH EDITION WILLIAM
LANEN ALL CHAPTERS A+ GUIDE COMPLETE
NEWEST VERSION 2026/2027 GRADED A+ TEST
BANK
9
Activity-Based Costing g
Solutions to Review Questions
g g g
9-1.
Commongallocationgbasesgaregdirectglabor-
hours,gdirectglaborgcosts,gandgmachinehours.gSomewhatglessgcommongisgdirectgmaterialgcosts.
9-2. Thegtermg“deathgspiral”grefersgtogagprocessgthatgbeginsgbygattemptinggtogincreasegpricesgto
gmeetgreportedgproductgcosts.gHighergpricesgreducegdemand,gleadinggtogproductiongandgst
illghighergreportedgproductgcosts.gEventually,gthegfirmglosesgproductsgasgthegmarketgwillgnot
gsupportgthemgandggoesgoutgofgbusiness.gThegdeathgspiralgisgnotgthegresultgofgthegcostgsyst
emgdirectly,gbutgthegresultgofgmanagersgmakinggdecisionsg(ingthisgcasegraisinggprices)gbas
edgongthegcostgsystemgthatgisg(oftenginaccurately)gsignalinggincreasedgcosts.
9-3.
False.gDepartmentgallocationgisgagtwo-
stagegprocess,gsogthegfirststagegassignmentgofgcostsgandgthegchoicegofgcostgdriversgaffectsgthegallocati
ongofgcostsgtog
products.gThegtotalgproductgcostsgaregthegsamegundergeithergapproach,gbutgthegindividualg
productgcostsgdiffer.gThisgcangaffectgthegdecisionsgmanagersgmakegregardinggindividualgpr oducts.
9-4.
Mostgcompaniesgproducegmultiplegproductsgandgsimplygaddinggthemgupgdoesgnotgaccount
gforgdifferencesgingcomplexitygof gthegusegofgresources.gAsgangextremegexample,gsupposega
gcompanygproducedgairplanesgandgstaplers.gAllocatinggoverheadgongthegbasisgofgunitsgwou
ldgassigngthegsamegoverheadgcostgtogagstaplergandgagplane.
,
,9-5.
Thegcostsgincludegthegsystemsgandgthegsoftware,gbutgthegmostgimportantgcostgisgmanagers
’gtime.gManagersgneedgtogmakegmanygdecisionsgaboutgthegactivitiesgandgthegcostgdriversga
ndgmanagersgneedgtogmakegmanygofgthegfirststagegallocations.gThegbenefitsgcomegfromghavinggbettergi
nformationgaboutgthegusegofgres ourcesgandgbetterginformationgforgdecisions.
Solutions gManual,gChapterg9 483
Stuvia.com - The Marketplace to Buy and Sell your Study Material
9-6.
1. Identifygactivitiesgthatgconsumegresources.
2. Identifygthegcostgdrivergassociatedgwithgeachgactivity.
3. Computegagcostgrategpergactivitygunitg(e.g.,grategpergsetup,grategpergpart,grategperg
machine-hour).
4. Allocategcostsgtogproductsgbygmultiplyinggthegactivitygrategtimesgthegvolumegofgactivitygc
onsumedgbygthegproduct.
9-7.
Thegcostghierarchygisgagclassificationgofgcostsgintoggeneralglevelsgofgactivity.gCostsgassigne
dgtogthegdifferentglevelsgofgtheghierarchygtendgtogbegrelatedgtogthegvolumegofgthegactivitygvolu me.
9-8.
False.gWhilegthegtotalgcostgallocatedgisgthegsame,gthegreportedgcostsgforgindividualgproduct
sgwillgdiffer.gBecausegmanagersgmakegdecisionsgatgthegproductglevel,gitgisgimportantgthatgth
egreportedgcostsgreflect,gtogthegextentgpossible,gthegusegofgresourcesgbygthegproducts.
9-9.
Activity-
basedgcostinggwillgbenefitgmostgcompaniesgwithghighgoverheadgcostsgandgdiversegproductsg
andgprocesses.gIfgtheregisglittlegoverheadgorgifgtheregisgagsinglegproduct,gthegallocationgproce
ssgwillgnotgresultgingsignificantlygdifferentgproductgcosts.g(Evengifgtheregaregonlygagfew,grelativ
elyghomogeneousgproducts,gactivity-
basedgcostinggmaygbegusefulgforgcostgmanagement.gSeegchapterg10gforgagdiscussion.)
9-10.
Agpersonnelgdepartmentgprovidesgitsgservicesgbygcompletinggagsetgofgactivitiesgusinggreso
urces.gIngthisgway,gimplementinggactivitybasedgcostinggingangadministrativegfunctiongisgthegsamegasgim
plementinggitgingagmanufactu
,
,ringgfirm.gHowever,gthegproductsgandgactivitiesgmaygbegmuchghardergtogdefine,gmakinggitgl
essglikegagmanufacturinggenvironment.
9-11.
Complexitygaddsgcostsgbygrequiringgadditionalgresourcesgforgoverheadg(support)gactivitie
sgforgthegsamegvolume.gItgisgimportantgtogincludegcomplexitygingcostgsystemgdesignsgtogav
oidgspreadinggthegcostgofgcomplexitygacrossgbothgsimplegandgcomplexgproducts.
484 FundamentalsgofgCostgAccounting
Copyrightg2020g©gMcGraw-
,.
,
, Stuvia.com - The Marketplace to Buy and Sell your Study Material
9-12. Thegtwogquestionsgagmanagergmustganswergwhengimplementinggtime-
drivengactivitygbasedgcostinggareg(1)gwhatgisgthegcostgofgthegresourcesgsuppliedgtogagdepartme
ntgandg(2)g howgmuchgtimegitgtakesgtogcompletegthegvariousgactivitiesgofgthegdepartment.
9-13.
Timegequationsgallowgmanagersgtogadjustgthegtimegrequiredgforgactivitiesgforgselectedgcharacte
risticsgofgproductsgorgservices.
Solutions gManual,gChapterg9 485
Stuvia.com - The Marketplace to Buy and Sell your Study Material
Solutions to Critical Analysis and Discussion Questions
g g g g g g
9-14.
