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Activity Based Costing
Activity Based Costing MCQs
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Which of the following costs should not be included in product costs for internal management reports that are used for decision-making?
Costs of unit-level activities.
Costs of batch-level activities.
Costs of product-level activities.
Costs of organization-sustaining activities.
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Which of the following would probably be the most accurate measure of activity to use for allocating the costs associated with a factory’s purchasin...
Machine-hours
Direct labor-hours
Number of orders processed
Cost of materials purchased
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Guerra Electronics manufactures a variety of electronic gadgets for use in the home. Which of the following would probably be the most accurate measur...
Machine-hours
Direct labor-hours
Inspection time
Number of inspections
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The labor time required to assemble a product is an example of a:
Unit-level activity.
Batch-level activity.
Product-level activity.
Organization-sustaining activity.
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Production order processing is an example of a:
Unit-level activity.
Batch-level activity.
Product-level activity.
Organization-sustaining activity.
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Assembling a product is an example of a:
Unit-level activity.
Batch-level activity.
Product-level activity.
Organization-sustaining.
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Setting up a machine to change from producing one product to another is an example of a:
Unit-level activity
Batch-level activity.
Product-level activity.
Organization-sustaining activity.
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Designing a new product is an example of a:
Unit-level activity.
Batch-level activity.
Product-level activity.
Organization-sustaining activity
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The plant manager’s salary is an example of a:
Unit-level activity.
Batch-level activity.
Product-level activity.
Organization-sustaining activity.
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Machining a part for a product is an example of a:
Unit-level activity.
Batch-level activity.
Product-level activity.
Organization-sustaining activity.
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If substantial batch-level or product-level costs exist, then overhead allocation based on a measure of volume such as direct labor-hours alone:
is a key aspect of the activity-based costing model.
will systematically overcost high-volume products and undercost low-volume products.
will systematically overcost low-volume products and undercost high-volume products.
must be used for external financial reporting since activity-based costing cannot be used for external reporting purposes.
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If a cost object such as a product or customer has a negative yellow margin, then:
its red margin will be positive.
its red margin may be either positive or negative.
its red margin will be negative.
its red margin will be zero
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If a cost object such as a product or customer has a negative red margin, then:
its green margin will be positive.
its green margin may be positive, negative, or zero.
its green margin will be negative.
its green margin will be zero.
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If a cost object such as a product or customer has a positive yellow margin, then: A) B) C) D)
its green margin will be positive.
its green margin may be positive, negative, or zero.
its green margin will be negative.
its green margin will be zero.
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An activity-based costing system uses which of the following procedures?
Overhead costs are traced to activities, then costs are traced to products.
Overhead costs are traced directly to products.
Overhead costs are traced to departments, then costs are traced to products.
All overhead costs are expensed as incurred.
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An activity that is consumed by a final cost object, such as a product or customer, is called a(n):
secondary activity.
primary activity.
overhead activity.
activity inventory.
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All of the following are non-unit-based activity drivers EXCEPT
number of material moves.
number of setups.
number of inspections.
number of direct labor hours.
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If activity-based costing is used, modifications made by engineering to the product design of several products would be classified as a
batch-level activity.
facility-level activity.
unit-level activity.
product-level activity.
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Which of the following statements about activity-based costing is not true?
Activity-based costing is useful for allocating marketing and distribution costs.
Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products.
In activity-based costing, cost drivers are what cause costs to be incurred.
Activity-based costing differs from traditional costing systems in that products are not cross subsidized.
