Chapter 8
ACTIVITY-BASED COSTING (ABC)
MULTIPLE CHOICES-THEORETICAL
1. Traditional costing system are characterized by their use of which of the
... [Show More] following
measures as bases for allocating overhead costs to output:
a. Unit-level drivers.
b. Batch-level drivers.
c. Product-level drivers.
d. Plant-level drivers.
2. ABC systems are characterized by their use of which of the following measures as bases
for allocating overhead to output:
a. Unit-level drivers.
b. Batch-level drivers.
c. Product-level drivers.
d. All of the above.
3. All of the following are distinctions that usually exist between traditional and ABC costing
sytems, except that:
a. The number of overhead cost pools tends to be lower in ABC systems.
b. The number of allocation bases tends to be higher in ABC system.
c. Costs within an ABC cost pool tend to be more homogeneous than the costs within a
traditional system's cost pool.
d. All ABC systems are two-stage costing systems, while traditional systems may be one or
two stage.
4. Activity-based costing:
a. Is the initial phase of converting to a just in time operating environment.
b. Can be used only in a job order costing system.
c. Is a two-phase overhead cost allocation system that identifies activity cost pools and cost
drivers.
d. Uses direct labor as its primary cost driver.
5. Examples of activities at the batch level of cost include:
a. scheduling, setting up, and moving
b. cutting, painting, and packaging,
designing, changing, and advertising
d. heating, lighting, and security
6. Compared to an ABC system, a traditional costing system reports:
a. A lower unit cost for high volume product and a higher unit cost for low volume products.
b. A higher unit cost for high volume products and a lower unit cost for low volume products
c. The same unit costs for high and low volume products as does an ABC system
d. Either higher or lower unit cost for high volume products than an ABC system depending
upon the level of fixed costs
7. Any activity that causes resources to be consumed is called:
a. Just in time activity
b. Facility level nativity
c. Cost driver
d. Nonvalue-added activity
8. Activity based costing:
a. Can be used only in a process cost system
b. focuses on units of production
c. focuses on activities performed to produce a product
d. Uses only a single basis of allocation
9. Examples of activities at the product level of costs include:
a. designing, changing and advertising
b. cutting, painting, and packaging
c. scheduling setting up and moving
d. heating, lighting, and security
10. Example of batch level activity drivers include
a. number of batches and material moves
b. units of output and direct labor hours
c. number of products and design changes
d. square footage occupied
MULTIPLE CHOICES-COMPUTATIONAL
1. Tower Company incurs about P860,000 in manufacturing overhead costs each month
which had been allocated to individual product lines based on their relative shares of direct
labor hours (DLH). The company works about 100,000 DLH per month. The company is
concerned that using DLH is inappropriate because some costs are driven by other
activities. The following information regarding cost pools and drivers has been developed:
Product AB are produced in large batches, while Product CD are as specialty line that only a
few customers buy.
What is the overhead to be allocated to each product line using DLH as the only cost driver?
Product AB : Product CD
a. P13,760 : P1,270
b. P13,760 : P1,720
c. P14,000 : P7,120
d. P14,760 : P2,170
2. Using the data in No. 1, the overhead to be allocated to each product Line using the
Activity. Based Costing (ABC) is: [Show Less]