**Title: Understanding Costing Methods in Management Accounting**1. **If management wants the most accurate product cost, which of the following costing methods should be used?** - Normal costing using a plantwide overhead rate. - Activity-based costing. - Volume-based costing using a plantwide overhead rate. - Volume-based costing using departmental overhead rates.2. **Which costing method tends to overstate the cost of high-volume products?** - Differential costing. - Job order costing. - Activity-based costing. - Traditional volume-based costing.3. **Disadvantages of activity-based costing include** - It is not acceptable under GAAP for external reporting. - It can be costly to implement. - It can be used in activity-based management. - It is not acceptable under GAAP for external reporting and it can be costly to implement.**Explanation:**This text presents a set of multiple-choice questions aimed at assessing the understanding of various costing methods in management accounting. It specifically focuses on choosing the most accurate costing method, identifying a method that might overstate costs, and discussing potential disadvantages of activity-based costing (ABC). Such questions are useful for educational purposes, helping students grasp the practical implications and limitations of different costing strategies. Activity-based costing is highlighted as a sophisticated method, albeit with its challenges in terms of cost and external reporting standards.

Costing method refers to the way of calculating the total cost of a final product. It is a tool in…

1. If management wants the most accurate product cost, which of the following costing methods should be used? O Normal costing using a plantwide overhead rate. O Activity-based costing. O Volume-based costing using a plantwide overhead rate. O Volume-based costing using departmental overhead rates. 2. Which costing method tends to overstate the cost of high-volume products? O Differential costing. O Job order costing.

1. If management wants the most accurate product cost, which of the following costing methods should be used? O Normal costing using a plantwide overhead rate. O Activity-based costing. O Volume-based costing using a plantwide overhead rate. O Volume-based costing using departmental overhead rates. 2. Which costing method tends to overstate the cost of high-volume products? O Differential costing. O Job order costing.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

**Title: Understanding Costing Methods in Management Accounting**

1. **If management wants the most accurate product cost, which of the following costing methods should be used?**

- Normal costing using a plantwide overhead rate.
- Activity-based costing.
- Volume-based costing using a plantwide overhead rate.
- Volume-based costing using departmental overhead rates.

2. **Which costing method tends to overstate the cost of high-volume products?**

- Differential costing.
- Job order costing.
- Activity-based costing.
- Traditional volume-based costing.

3. **Disadvantages of activity-based costing include**

- It is not acceptable under GAAP for external reporting.
- It can be costly to implement.
- It can be used in activity-based management.
- It is not acceptable under GAAP for external reporting and it can be costly to implement.

**Explanation:**

This text presents a set of multiple-choice questions aimed at assessing the understanding of various costing methods in management accounting. It specifically focuses on choosing the most accurate costing method, identifying a method that might overstate costs, and discussing potential disadvantages of activity-based costing (ABC).

Such questions are useful for educational purposes, helping students grasp the practical implications and limitations of different costing strategies. Activity-based costing is highlighted as a sophisticated method, albeit with its challenges in terms of cost and external reporting standards.

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