71 In what fundamental ways does activity-based costing differ from traditional costing methods such as job-order costing as described

in Chapter 3? Activity based costing is usually an internal costing system for management to use as a tool in making decisions. It is rarely shown to outsiders. ABC systems provide more accurate costs which enable managers to make better choices. 72 Why is direct labor a poor base for allocating overhead in many companies? Direct labor is only useful as an overhead base when overhead cost and direct labor hours are highly linked, otherwise it can skew costs. 73 Why are top management support and cross-functional involvement crucial when attempting to implement an activity-based costing system? The data can be easily misunderstood and must be used carefully when basing decisions off of the information. 74 What are unit-level, batch-level, product-level, customer-level, and organization-sustaining activities? These are the five levels of activity that ABC is focused on. 75 What types of costs should not be assigned to products in an activity-based costing system? Costs that are not associated with the product should not be assigned to the product. 81 What is a budget? What is budgetary control? A budget is a financial plan for the future. 82 Discuss some of the major benefits to be gained from budgeting. Planning and control are two main benefits of budgeting. In this way things can be measured and adjusted to reach a target. Also, issues can be seen before they come up and addressed before it affects the production. 83 What is meant by the term responsibility accounting? This is the idea that managers should be held accountable for only those things they have direct control over. Other things they cant control should not be held against them. 84 What is a master budget? Briefly describe its contents. The master budget is the combination of all the separate budgets from other departments put into one final layout. It usually contains a lay out of sales, production, and goals that are assembled in the final cash budget, income statement, and balance sheet. 85 Why is the sales forecast the starting point in budgeting? Sales estimates are needed so that everyone has some sort of goal to shoot for. This allows for ever department to order supplies needed and have enough manpower on hand to produce the estimated amount of products.