Which of the following is true for activity-based costing (ABC)? Question 18 options: ABC allocates indirect costs in proportion to direct costs. It identifies the costs of products and services based on the revenue they generate. The tools of ABC can be used to conduct customer profitability analysis. With ABC, the company can estimate all costs coming from the customer, less revenue. ABC considers the real costs associated with each product.
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TRUE or FALSE 1. In general, direct costs are allocated, while indirect costs are assigned. 2. The predetermined overhead rate is calculated by dividing the estimated overhead cost by the actual cost driver. 3. Activity-based costing is appropriate for a company that manufactures diverse products. 4. Activity-based costing is appropriate for a company that has high overhead costs that are not proportional to unit volumes of individual products. 5. There is a direct relationship between the complexity of a production process and overhead costs. 6. Activity-based costing system does not use volume-based cost drivers. 7. Product- or process-level costs include engineering changes, design, and development costs. 8. Implementing activity-based costing (ABC) has a direct impact on reducing overhead in an organization. 9. Activity-based costing is based on the concept that products produce activities and activities produce resources. 10. Activity-based costing is just another method of inventory valuation and it is not relevant for operating decisions. 11. Costs that are associated with the production of a group of similar products at the same time are referred to as product-level costs.
Adi S.
9) Which of the following is true with activity-based cost accounting? A) Activity-based costing ignores the allocation of marketing and distribution costs. B) Activity-based costing is more likely to result in major differences from traditional costing systems when the firm manufactures only one product rather than multiple products. C) The focus is on activities that account for a sizable fraction of indirect costs. D) Chances of product-cost cross-subsidization are higher in activity-based costing compared to traditional costing systems.
Jennifer S.
An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because: activity-based costing results in less accurate costs than more traditional costing methods based on direct labor-hours or machine-hours. under activity-based costing manufacturing costs are assigned to products. under activity-based costing the sum of all product costs does not equal the total costs of the company. activity-based costing has not been approved by the United Nation's International Accounting Board.
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Principles of Accounting Volume 1: Financial Accounting
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