Which of the following conditions would favour the use of activity-based costing (ABC) rather than traditional absorption costing? (1) Overheads represent a large proportion of total cost (2) A diverse product range with complex manufacturing operations (3) Overheads are primarily driven by volume of output O 1, 2 and 3 O 2 only O1 and 3 only O 1 and 2 only

Which of the following conditions would favour the use of activity-based costing (ABC) rather than traditional absorption costing? (1) Overheads represent a large proportion of total cost (2) A diverse product range with complex manufacturing operations (3) Overheads are primarily driven by volume of output O 1, 2 and 3 O 2 only O1 and 3 only O 1 and 2 only

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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Discuss how traditional methods of allocating overhead to products may not provide a good measure of overhead resources used. How might activity based costing overcome these limitations?
Why would a company choose to use activity based costing vs the single department method or the multiple department method?
Which of the following line items will not be found in the absorption costing income statement? Group of answer choices Variable manufacturing and non-manufacturing costs Contribution margin Gross profit Fixed manufacturing costs
Which of the following statements is true? O The first step in activity-based costing is to assign overhead costs to products using cost drivers ABC usually results in less appropriate management decisions Activity-based costing allocates overhead to multiple activity cost pools and assigns the cost pools to products using cost drivers O Traditional costing systems use multiple predetermined overhead rates
The following statements refer to organisations that use service costing:(i) The service provided will be a homogenous product.(ii) The cost of materials is relatively small compared to labour, expenses and overheads.(iii) A problem with service costing is the difficulty in defining a realistic cost unit.(iv) Inventory levels are generally high in-service costing industries.Which of the above statements are correct?a) (i) and (ii)b) (ii) and (iii)c) (ii) and (iv)d) (i) and (iv)
Which of the following statements about activity-based costing (ABC) is false? Group of answer choices In activity-based costing, cost drivers are what cause costs to be incurred. 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. Activity-based costing is useful for allocating marketing and distribution costs. Activity-based costing differs from traditional costing systems in that it allocates costs according to the rates at which a product consumes different activities.
When a company implements activity-based costing, manufacturing overhead cost is often shifted from low volume products to high volume products, with a higher unit cost resulting for the high volume products. Please explain (True or False) thoroughly.
The following statements have been made in relation to activity-based costing: 1. A cost driver is a factor which causes a change in the cost of an activity. 2. Traditional absorption costing tends to underestimate overhead costs for high-volume products. Which of the above statements is/are true? O A. 1 only O B. 2 only OC. Neither 1 nor 2 O D. Both 1 and 2
Which of the following is most likely to be true of the manufacturing overhead costs assigned to a product with relatively low volume and high complexity? O a. An ABC system will assign the same manufacturing overhead costs to the product as a volume- based system. O b. Avolume-based system will assign more manufacturing overhead costs to the product than an ABC system. O c. An ABC system will assign more manufacturing overhead costs to the product than a volume-based system. O d. An ABC system will assign manufacturing overhead costs to the product, while a volume-based system will not. e to search W 11:35 A D A dx ENG 22-05-2021 hp 141 brt se delete home end 96 - backspace num ask lock T 7V 8A 94 home Dg up K enter 5 0 pause ↑ shift 11 end alt ctrl SUt
Which of the following statements regarding activity-based costing (ABC) is NOT correct? a. Under ABC cost centres are replaced by cost pools b. Blanket overhead recovery rates (OAR) are replaced with cost driver rates c. ABC uses one common overhead recovery rate, such as labour hours. d. ABC tackles the problems of absorption costing by adopting a much more accurate way of charging overhead to cost units.
Please explain the statement below thoroughly with examples. (Ture or False) "In activity-based costing, the manufacturing overhead cost per unit will depend partially on the number of units in a batch."