One disadvantage of activity-based costing is that it cannot be used for external reporting. This is because all of the following except: O a. All of the given reasons are correct O b. Activity-based costing is very detailed unlike external reporting needs, which tend to use summarized figures for all products without distinction. Oc. Activity-based costing uses subjective measures, which is normally not accepted by auditors O d. Activity-based costing does not follow GAAP O e. Activity-based costing might result into inaccurate cost calculations

One disadvantage of activity-based costing is that it cannot be used for external reporting. This is because all of the following except: O a. All of the given reasons are correct O b. Activity-based costing is very detailed unlike external reporting needs, which tend to use summarized figures for all products without distinction. Oc. Activity-based costing uses subjective measures, which is normally not accepted by auditors O d. Activity-based costing does not follow GAAP O e. Activity-based costing might result into inaccurate cost calculations

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 12MC: Which statement is correct? A. Activity-based cost systems are less costly than traditional cost...

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Which of the following is a reason a company would implement activity-based costing? A. The cost of record keeping is high. B. The additional data obtained through traditional allocation are not worth the cost. C. They want to improve the data on which decisions are made. D. A company only has one cost driver.
Why does a company use a standard costing system? A. to identify variances from actual cost that assist them in maintaining profits B. to identify nonperformers in the workplace C. to identify what vendors are unreliable D. to identify defective materials
Explain how a plantwide overhead rate, using a unit-based driver, can produce distorted product costs. In your answer, identify two major factors that impair the ability of plantwide rates to assign cost accurately.
Which statement is correct? A. Activity-based cost systems are less costly than traditional cost systems. B. Activity-based cost systems are easier to implement than traditional cost systems. C. Activity-based cost systems are more accurate than traditional cost systems. D. Activity-based cost systems provide the same data as traditional cost systems.
Why are there objections to using absorption costing when segment reports of profitability are being prepared?
all of the following are reasons to use backflush costing, except a. Managers tend to use their limited resources on developing more accurate product cost data. b. Complex Ledger systems may be too costly to develop under traditional cost tracking systems. c. Accuracy is critical whem allocationg accurate conversion cost per unit. d. A fairly rough allocation may be sufficient for external reporting purposes.
Which of the following is false about activity-based costing? Implementing an activity-based costing system is more costly than implementing a traditional cost allocation system. In ABC, the assumption is that activities use resources or cause costs. An activity-based costing system relies only on volume measures such as direct labor hours to allocate all overhead costs to products. A traditional cost allocation system and an activity-based costing system are used to estimate the profitability of products.
Which of the following is NOT a problem associated with standard cost accounting? a. Standard costing motivates management to produce large batches of products and build inventory. b. Applying standard costing leads to product cost distortions in a lean environment. c. Standard costing data are associated with excessive time lags that reduce its usefulness. d. The financial orientation of standard costing may promote bad decisions. e. All of the above are problems with standard costing.
Disadvantages of activity-based costing include which of the following? a. It is not acceptable under GAAP for external reporting. b. It can be costly to implement. c. It can be used in activity-based management. d. Both a. and b.
Which of the following statements is not true regarding the use of variable and absorption costing for performance measurement? The net income reported under the absorption method is less reliable for use in performance evaluations because the cost of the product includes fixed costs, which means the level of inventory affects net income. The net income reported under the contribution income statement is more reliable for use in performance evaluations because the product cost does not include fixed costs. Variable costing isolates contribution margins to aid in decision making. The Internal Revenue Service allows either absorption or variable costing as long as the method is not changed from year to year, while U.S. GAAP only allows absorption costing.
A downside to absorption costing is: a) not including fixed manufacturing overhead in the cost of the product b) that it is not really useful for managerial decisions c) that it is not allowable under GAAP d) that it is not well designed for cost-volume-profit analysis
Which of the following statements is not true regarding the use of variable and absorption costing for performance measurement? a. The net income reported under the absorption method is less reliable for use in performance evaluations because the cost of the product includes fixed costs, which means the level of inventory affects net income. b. The net income reported under the contribution income statement is more reliable for use in performance evaluations because the product cost does not include fixed costs. c. Variable costing isolates contribution margins to aid in decision making. d. The Internal Revenue Service allows either absorption or variable costing as long as the method is not changed from year to year, while U.S. GAAP only allows absorption costing.