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Terms:

activity-based costing system	batch
activity cost driver	activity cost pools
output	cross-subsidization
non-value-added activity	peanut butter
product (or service)	refinement
value-added activity	facility sustaining
activity-based management	cost plus

Complete the sentences below using the above terms:

1.	One common _______ to a traditional or _______ costing system is called a(n) _______. The single manufacturing overhead cost pool is separated into different _______ distinguished from one another by their measure of benefits provided, or the _______. Benefits provided unequally to distinct types of outputs provide value added to customers, for which customers are willing to pay. This is the basic concept that guides the approach to cost reduction and control called _______.
2.	The management team identifies and eliminates _______ and its costs and reorganizes the _______ to minimize costs. There are four levels of activities in a cost hierarchy. From narrowest to broadest in scope they are _______, _______, _______, and _______ costs.
3.	When a management team fails to develop a cost management system that reports faithfully the unequal benefits (and costs) of value-added activities, there is a high risk of mispricing distinct types of outputs. If managers use _______ pricing, an overcosted output will be priced too high and an undercosted product will be priced too low relative to the economic value added. The result is preventable of _______ costs of the lower-priced by the higher-priced product.

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