1. The costs of activities that are classified as unit level should be proportional to the number of units produced.
2. Batch level activities are performed each time a batch is handled or processed, regardless of how many units are in the batch.
3. Product level activities relate to specific products and typically must be carried out regardless of how many batches are run or units of product are made.
4. Activity based management seeks to eliminate waste by allocating costs to products that waste resources.
5. Activity based costing may supplement, rather than replace, a company”s formal cost accounting system.
6. In activity based costing, nonmanufacturing costs as well as manufacturing costs may be assigned to products.
7. When activity based costing is used for internal decision making, the costs of idle capacity should be considered period costs that flow through to the income statement as an expense of the current period.
8. A transaction driver provides a simple count of the number of times that an activity occurs.
9. In activity based costing, all manufacturing costs must be included in product costs.
10. The first stage allocation in activity based costing is the process by which overhead costs are assigned to activity cost pools.
11. The activity rates computed in activity based costing can provide valuable clues concerning where there is waste and scope for improvement in an organization.
12. In the second stage allocation in activity based costing, costs that were not allocated in the first stage are assigned to the company”s most profitable products.
13. If a product has a negative product margin (i.e., loss) according to an activity based costing system, it should be dropped.
14. When a company implements activity based costing system, manufacturing overhead cost is often shifted from low volume products to high volume products, with a higher unit cost resulting for the high volume products.
15. An action analysis report provides more detail about costs and how they might adjust to changes in activity than a conventional activity based costing analysis.