Activity Based Costing

Explanation of Activity Based CostingWe also have Crosswords and Q&A for this topic.

1.

Activity based costing is considered to be a traditional costing method.

True

False

2.

Under ABC, indirect manufacturing costs are predominantly assigned on the basis of direct machine hours.

True

False

3.	Which of the following would not be included in a product's cost for inventory valuation for the financial statements?
Factory supplies              Quality control              Interest expense

4.	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?
ABC              Direct labor hours              Machine hours

5.	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?
ABC              Direct labor hours              Machine hours

6.

Activity-based costing will provide greater accuracy when allocating costs than a manufacturer's machine hours when its products and customers are ________ diverse.

less

more

7.

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.

little

much

8.

The cost to set up production equipment is best allocated directly to products via machine hours.

True

False

9.

Setup cost is an example of a batch-level cost.

True

False

10.

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.

True

False

11.

In activity-based costing, the manufacturing overhead cost per unit will depend partially on the number of units in a batch.

True

False

12.	In ABC the assumption is that __________________ use resources or cause costs.
activities              products

13.

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.

True

False

14.

A product with a high gross profit could be an unprofitable product.

True

False

15.

Activity-based costing can be used to allocate SG&A expenses in order to assist management with pricing and other marketing decisions.

True

False