Chapter 9

Question 1

Process that begins by attempting to increase price to meet reported product costs, losing market, reporting still higher costs, and so on, until the firm is out of business.

Answer 1

death spiral

Question 2

Allocation method using one cost pool for the entire plant. It uses one overhead allocation rate, or one set of rates, for all of a plants ‘ departments.

Answer 2

plantwide allocation method

Question 3

Allocation method that has a separate cost pool for each department, which has its own overhead allocation rate or set of rates.

Answer 3

department allocation method

Question 4

Costing method that first assigns costs to activities and then assigns them to products based on the products’ consumption of activities.

Answer 4

activity-based costing (ABC)

Question 5

Factors that cause, or “drive,” costs.

Answer 5

cost drivers

Question 6

Classification of cost drivers into general levels of activity, volume, batch, product, and so on.

Answer 6

cost hierarchy

Question 7

Time equations allow managers to adjust the times for orders with different characteristics.

Answer 7

time equations