ANY Acctg 48 Chapter 17 True/False Practice Qi T/F 1 The premise of ABC is that

Question

ANY Acctg 48 Chapter 17 True/False Practice Qi T/F 1 The premise of ABC is that it takes activities to make products and provide services and these activities drive costs T/F 2. A cost pool is a collection of costs that are related to the same or simiar actviy T/F 3. Activity-based costing first assigns costs to products and then uses these product costs to assign costs to manufacturing activities T/F 4. Multiple cost pools are used when allocating overhead using the plantwide overhead rate method T/F 5. A major disadvantage of using a plantwide overhead rate is the extreme difficulty in gathering the needed information The usefulness of overhead allocations based on a plantwide overhead rate depends on two crucial assumptions: (1) the overhead cost is correlated with the allocation base: and (2) all products use overhead cost in dissimilar proportions T/F 6. T/F 7. Some companies allocate their overhead cost using a plantwide overhead rate largely because of its simplicity T/F 8. When products differ in batch size and complexity, they usually consume different amounts of overhead resources. T/F 9. Overhead costs are often affected by many issues and are frequently too complex T/F 10. Compared T/F 11. The use of a plantwide overhead rate is not acceptable for external reporting under GAAP to be explained by any one factor to the departmental overhead rate method, the plantwide overhead rate method usually results in more accurate overhead allocations ABC allocates overhead costs to products based on input measures rather than output measures T/F 12. ABC is significantly less costly to implement and maintain than more traditional overhead costing systems T/F 13. When using the plantwide overhead rate method, total budgeted overhead costs are combined into one overhead cost pool. T/F 14. The departmental overhead rate method traces costs to each department and then determines an allocation base for each department. T/F 15. Activity-based costing involves four steps: (1) identify activities and the costs they cause, (2) group similar activities into cost pools, (3) determine an activity rate for each activity T/F 16. cost pool, and (4) allocate overhead costs to products using those activity rates

Explanation / Answer

1. The given statement is TRUE. The ABC analysis is an accurate product costing where there is a direct correlation to production volume and cost.

2. The given statement is TRUE. Cost pool is aggregate of costs incurred for similar activities.

3. The given statement is TRUE. ABC first assigns costs to the activities and later assigns cost of activities only to products that are actually required in further activities.

4. The given statement is FALSE. The method used while allocating overhead using the plant wide overhead rate method is known as Single cost pool.

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