The directors of GHJ Ltd are considering the introduction of activity-based costing (ABC). A trainee manager has asked which of the following comments about the calculation of overhead cost using ABC are not correct: 1. Each cost will have a unique, identifiable, cost driver 2. The volume of activity does not influence cost 3. The overhead cost calculated using ABC will always be significantly different from the overhead cost calculated using absorption costing a) 2 and 3 b) 1 and 2 c) 1 and 3 d) 1, 2, and 3

The directors of GHJ Ltd are considering the introduction of activity-based costing (ABC). A trainee manager has asked which of the following comments about the calculation of overhead cost using ABC are not correct: 1. Each cost will have a unique, identifiable, cost driver 2. The volume of activity does not influence cost 3. The overhead cost calculated using ABC will always be significantly different from the overhead cost calculated using absorption costing a) 2 and 3 b) 1 and 2 c) 1 and 3 d) 1, 2, and 3

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Description: The directors of GHJ Ltd are considering the introduction of activity-based costing (ABC). A trainee manager has asked which of the following comments about the calculation of overhead cost using ABC are not correct:1. Each cost will have a unique, i

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 5MC: Which of the following is a reason a company would implement activity-based costing? A. The cost of...

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Which of the following statements regarding activity-based costing (ABC) is NOT correct? a. Under ABC cost centres are replaced by cost pools b. Blanket overhead recovery rates (OAR) are replaced with cost driver rates c. ABC uses one common overhead recovery rate, such as labour hours. d. ABC tackles the problems of absorption costing by adopting a much more accurate way of charging overhead to cost units.
Which of the following statements is true? a. Activity based costing can be used in service companies b. None of the given answers is correct. O c. Activity based costing (ABC) can be used for external reporting. d. Traditional costing cannot be used for internal reporting. O e. A company can either choose Activity-based costing (ABC) or the traditional costing system to allocate its costs for external reporting. е.
Which of the following statements is true of activity-based costing? O a. Activities are the cost objects of the second stage of ABC. O b. ABC ignores the allocation of storage costs. O c. ABC is more likely to result in big differences from a traditional costing system if the business makes only one product rather than multiple products. O d. An activity cost pool collects costs related to the same activity. DUS PAGE NEXT PAGE e here to search 11:38 O a dx ENG 22-05-2021 hp రు 144 ort sc delete end home 4 7\ - backspace num lock E 8. home F K enter pause M ↑ shift end alt ctrl
Hello, Have a question. Which of the following are the advantages of the ABC approach relative to using a single predetermined overhead application rate based on direct labor hours? Select all that apply. A. ABC does not help in decision making. B. ABC systems produce more accurate financial information. C. ABC approach is likely to provide better information to manufacturing managers. D. ABC helps in decision making. E. ABC systems produce more accurate product costing information. Thanks...
Which of the following statement is false? Multiple Choice Fixed manufacturing overhead is treated as a product cost under absorption costing method. Variable costing method is more useful than absorption costing approach in internal and managerial decision-making. The absorption costing approach is used in external financial reporting. The contribution margin income statement format separates costs according to cost behaviour. Fixed manufacturing overhead is treated as a period cost under absorption costing method.
[4] Product costing provides useful decision-making information in relation to all of the following alternatives, but one. Which one? a) Non-manufacturing firms bị Management planning, cost control, and performance evaluation c) Financial reporting dj Developing awareness about the company environmental impacts [5] The main distinction between job costing and process costing is: a) The difference in the level of detail required by each system b) The use made of the costing information c) An accounting difference dj The cost object on which costs are accumulated [6] In its first month of operations, Margherita Ltd produced 100,000 units. 90,000 units were sold. The manufacturing cost per unit was as follows: Direct materials cost Direct labour cost Variable fixed overhead cost Fixed overhead cost Total per unit cost £40 £20 £30 £50 £140 Margherita Ltd's operating income under absorption costing is: a) Lower than variable costing by £500,000 b) Higher than variable costing by £600,000 c)…
The following statements have been made in relation to activity-based costing: 1. A cost driver is a factor which causes a change in the cost of an activity. 2. Traditional absorption costing tends to underestimate overhead costs for high-volume products. Which of the above statements is/are true? O A. 1 only O B. 2 only OC. Neither 1 nor 2 O D. Both 1 and 2
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 statements is true of activity-based costing? O a. ABC ignores the allocation of storage costs. O b. Activities are the cost objects of the second stage of ABC. Ос. An activity cost pool collects costs related to the same activity. O d. ABC is more likely to result in big differences from a traditional costing system if the business makes only one product rather than multiple products.
Which of the following statements regarding activity-based costing (ABC) is false? A. ABC is not an appropriate tool for analysing non-manufacturing costs. B. ABC can be used to analyse the profitability of customers. C. ABC evolved as a response to problems with traditional costing systems. D. ABC can be used to measure the cost of cost objects.
company You are a management accountant of EON and Brothers Ltd., a manufacturing that produces two products simultaneously in one of their production plants. You are asked to produce a management report on costing techniques. This company follows a traditional approach to costing and absorbs production overhead using machine hours. The company's policy is to add a 50% markup on the unit cost to obtain the selling price. The relevant information is given below: EON and Brothers Ltd. produces two similar products called Alfa and Beta. Total Overheads = £155,000 Machine Hours = 58980 hrs Product Alfa Beta Production Units 2,580 5,100 Material Cost per unit £31 £51 Labour Cost per unit £21 £17 Machine Hours per unit 11 16 After discussing with all the important people of the production plant you have allocated the overhead costs as mentioned below: % Overheads Set up Costs 30 Inspections 40 Materials Handling 30 Cost Pools are as mentioned below: Alfa Beta Total Setups 400 65 465…
If the Activity-Based Costing (ABC) method's main intention is to find a possibility to cut the Overhead and indirect costs from the cost of production, is the blow statement correct? Please explain thoroughly with examples and restate the correct statement if it is false. When a company implements activity-based costing, manufacturing overhead cost is often shifted from low volume products to high volume products, with a lower unit cost resulting for the high volume products. When a company implements activity-based costing, manufacturing overhead cost is often shifted from high volume products to low volume products, with a higher unit cost resulting for the low volume products. Does the shift from low-volume to high-volume or vice versa affect the product cost?