1. The death spiral can occur even in firms with increasing demand.

2. The death spiral concept refers to the process of continually decreasing selling prices to meet
foreign competition.
3. The basic approach in product costing is to allocate costs in the cost pools to the individual cost
objects, which are the products or services of interest.
4. The basic difference between a first-stage cost allocation and a second-stage cost allocation is
that cost pools are not used in first-stage cost allocations.
5. Predetermined overhead rates are not used in first-stage cost allocations but are used in
second-stage cost allocations.
6. The plantwide allocation concept cannot be used in nonmanufacturing organizations.
7. The single-stage cost allocation system uses a plantwide rate because the cost pool is the entire
plant.
8. The department cost allocation method provides more accurate product cost information for
managerial decision-making than the plantwide cost allocation method.
9. The plantwide cost allocation method should be used by companies that manufacture products
that are similar and use the same resources.
10. Using the department allocation method, a company establishes a separate overhead
allocation rate for each department.
11. If a company manufactures diverse products using different sets of resources in a plant, it is best
to use a plantwide allocation rate.
12. Activity-based costing (ABC) is a two-stage cost allocation system that (1) allocates costs to
activities and (2) then to products based on their use of the activities.
13. The basic difference between the department cost allocation method and activity-based costing
(ABC) is the number of stages involved in allocating costs to products.
14. Direct labor cost (DLC) and direct labor hours (DLH) are examples of volume-related cost drivers
in the cost hierarchy.
15. Any discrete task that an organization undertakes to make or deliver a product or service is
known as a stage.
16. Activity-based costing is based on the concept that products produce activities and activities
produce resources.
17. The number of products produced is an example of a facility-related cost driver in the cost
hierarchy.
18. A cost hierarchy classifies cost drivers by general dimensions or levels of activity.
19. If a company has identified three major activities as setting up, handling material, and
assembling, possible cost drivers would most likely be set-up hours, production runs, and number
of shipments, respectively.
20. When applying activity based costing, the first step would be to compute the cost driver rates.
21. Activity-based costing (ABC) provides more detailed measures of costs than do plantwide or
department allocation methods.
22. Activity-based costing is so beneficial because it provides more information about product costs
but requires less recordkeeping.
23. Installing activity-based costing requires teamwork among employees and departments within an
organization.
24. Before using activity-based costing (ABC), managers must apply the cost-benefit principle to the
additional recordkeeping costs associated with ABC.
25. In general, traditional product costing methods allocate less cost to low-volume products and
more costs to high-volume products than activity-based costing (ABC).
26. Using direct labor costs to allocate overhead costs in an activity-based costing (ABC) system will
encourage management to reduce labor costs.
27. In general, low-volume products (and services) have a lower degree of complexity associated
with them.
28. When overhead is applied based on the volume of output, high-volume products tend to
"subsidize" low-volume products.
29. The flow of activity-based costs through the ledger is the same as their flow using traditional
methods except that the accounts are based on activities, not departments.
30. Activity-based costs are a function of both volume and complexity.
31. Activity-based costing (ABC) can be applied to administrative activities (e.g., purchasing) but not
to marketing activities.
32. Within a purchasing department, the activity of placing orders could best be costed by a cost
driver of the potential number of vendors.
33. Individual ABC systems do not vary because there is one ABC method.
34. It is possible to apply activity-based costing (ABC) to segments of an organization without
applying it to the entire organization.
35. Time-driven activity based costing (TDABC) is more costly to implement than an unmodified
activity-based costing system.
36. Time equations can be used in extended time-driven activity based costing (TDABC) systems to
allow managers to adjust the times for orders with different characteristics.