Document2 nces Mailings Review View Q1- Ordinarily, the unit product costs of hi

Question

Document2 nces Mailings Review View Q1- Ordinarily, the unit product costs of high-volume products increase and the unit low-volume products decrease when activity-based costing replaces a traditional overhead costing systems based on direct labour-hours. True False Predetermined activity rates in activity-based costing are computed by dividing estimated activity costs by the estimated activity volume for each activity cost pool. True False When activity-based costing is used, a company will have only one predetermined overhead rate. True False In activity-based costing, a plantwide overhead rate is used to apply overhead to products. True False The implementation costs of an ABC system are often considerable and can deter companies from adopting it True False Which of the three different overhead cost allocation methods attempts to assign overhead to cost objects more a ly? bdepartmental overhead rates cjactivity-based costing d)plantwide overhead rate Departmental overhead rates may not correctly assign overhead costs due to: a)the use of direct labour-hours in allocating overhead costs to products rather than machine time or quantity of materials used B)the high correlation between direct labour-hours and the incurrence of overhead costs. cjoverreliance on volume as a basis for allocating overhead costs where products differ regarding dithe number of units produced, lot size, or complexity of production. eldifficulties associated with identifying cost pools for the first stage of the allocation process. Activity-based costing aldoes not have to be adapted for decision-making purposes bill still not result in 100% true costs cis easy to implement d)does not lend itself to cost management MacBook Air

Explanation / Answer

1. False. It does not have any impact on the cost.

2. True. It is done to arrive at activity cost per unit.

3. False. It can have multiple rate for various activities.

4. False. Activity base rate is arrived at to divide overheads.

5. False. ABC is easy to implement.

6. Answer c. Activity based costing.

7. Answer d. Due to complexity of process, it may not be prudent to use department overhead rate.

8. Answer c. Easy to manage.

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