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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5) Activity based costing system differs from traditional costing systems in the treatment of A) direct labor costs B) direct material costs C) prime costs D) indirect costs
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
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Which among the following is not true about traditional costing system? a. This method allocates greater proportion of overheads to high volume products b. This method avoids the phenomenon of product cost cross subsidization c. This method allocates smaller proportion of overheads to low volume products d. This method leads to cost smoothing
What is the key difference between Absorption and Variable Costing? A Full Costing treats Manufacturing Overhead as a period cost B Variable Costing treats Fixed Manufacturing Overhead as a period cost C Absorption Costing only considers variable costs to calculate net income D Variable Costing only considers variable costs to calculate net income
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
Explain the difference between the cost classifications, ‘production prime costs’ and ‘indirect production overheads’, and discuss the cost accounting applications of the differences used for traditional absorption costing purposes [dont give chatgpt answer]
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.
Which one is a controllable cost? Select one: O a. Office salary Ob. Rent Factory Oc Office Rent O d. Cost of Raw material