For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. Show If you have difficulty answering the following questions, learn more about this topic by reading our Activity Based Costing (Explanation). Activity based costing is considered to be a traditional costing method. Under ABC, indirect manufacturing costs are predominantly assigned on the basis of direct machine hours. Which of the following would not be included in a product's cost for inventory valuation for the financial statements? Which would be the least favorable basis for allocating manufacturing overhead for a factory with automated equipment and a significant variation of services by its indirect labor? Which would be the most favorable basis for allocating manufacturing overhead for a factory with automated equipment and a significant variation of services by its indirect labor? Activity-based costing will provide greater accuracy when allocating costs than a manufacturer's machine hours when its products and customers are __________ diverse. When using machine hours for allocating manufacturing overhead (instead of activity-based costing), a low-volume item requiring a significant amount of special handling will be assigned too __________ manufacturing overhead. The cost to set up production equipment is best allocated directly to products via machine hours. Setup cost is an example of a batch-level cost. Manufacturing costs are often organized in the general ledger by function and department. When applying activity-based costing, these manufacturing costs will be sorted by activities. In activity-based costing, the manufacturing overhead cost per unit will depend partially on the number of units in a batch. In ABC the assumption is that __________ use resources or cause costs. If products are uniform and customers are similar in their demands, activity-based costing may not offer a significant advantage over machine hours when assigning overhead. A product with a high gross profit could be an unprofitable product. Activity-based costing can be used to allocate SG&A expenses in order to assist management with pricing and other marketing decisions. Want more practice questions? Recommended textbook solutions
 Glencoe Accounting: First Year Course1st EditionGlencoe McGraw-Hill 548 solutions Financial Accounting4th EditionDon Herrmann, J. David Spiceland, Wayne Thomas 1,097 solutions Horngren's Cost Accounting: A Managerial Emphasis16th EditionMadhav V Rajan, Srikant M. Datar 1,008 solutions Intermediate Accounting16th EditionDonald E. Kieso, Jerry J. Weygandt, Terry D. Warfield 2,307 solutions Cost Accounting, 14e, Global Edition (Horngren/Datar/Rajan) Chapter 5 Activity-Based Costing and Activity-Based Management Objective 5.1 1) If products are different, then for costing purposes: A) an ABC costing system will yield more accurate cost numbers B) a simple costing system should be used C) a single indirect-cost rate should be used D) none of the above Answer: A Diff: 1 Terms: activity-based costing (ABC) Objective: 1 AACSB: Reflective thinking 2) Overcosting a particular product may result in: A) loss of market share B) pricing the product too low C) operating efficiencies D) understating total product costs Answer: A Diff: 2 Terms: product undercosting Objective: 1 AACSB: Analytical skills 3) Undercosting of a product is most likely to result from: A) misallocating direct labor costs B) underpricing the product C) overcosting another product D) overstating total product costs Answer: C Diff: 2 Terms: product overcosting Objective: 1 AACSB: Reflective thinking 4) A company produces three products; if one product is overcosted then: A) one product is undercosted B) one or two products are undercosted C) two products are undercosted D) no products are undercosted Answer: B Diff: 1 Terms: product-cost cross-subsidization Objective: 1 AACSB: Ethical reasoning 1 Copyright © 2012 Pearson Education Which is not a benefit of an activity based cost management system?Activity based costing uses several cost pools to assign overhead costs to products. Therefore, b. Fewer cost pools used to assign overhead costs to products is not a benefit of activity based costing.
Which of the following statements is true about activityAnswer and Explanation:
The statement saying "activity-based costing can be applied to products but not to customers " is true.
Which of the following is true of an activityWhich of the following is true about activity-based costing? Explanation: ABC assumes that the resource-consuming activities that generate costs are activities and not outputs. ABC is appropriate for all types of cost accumulation systems, including both job order and process costing.
Which of the following is a benefit of activityActivity-based costing provides a more accurate method of product/service costing, leading to more accurate pricing decisions. It increases understanding of overheads and cost drivers; and makes costly and non-value adding activities more visible, allowing managers to reduce or eliminate them.
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Which of the following is not true about the benefits and costs of activity-based costing systems
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