Activity-Based Costing Concepts

A cost driver is

• An employee managing costs

• A factor influencing cost incurrence

• A type of direct cost

• A method of cost reduction

In ABC, allocation rates are determined by dividing

• Total cost by total revenue

• Total cost by total activity

• Total activity by total cost

• Total activity by cost driver

Which industry is most likely to benefit from ABC?

• Retail

• Manufacturing

• Agriculture

• Real estate

Which is an example of an allocation base?

• Direct labor hours

• Square footage

• Number of machine setups

• All of the above

ABC often reveals that traditional costing

• Undercosts simple products

• Overcosts complex products

• Misallocates indirect costs

• All of the above

The term 'cost pool' refers to

• Total indirect costs

• Grouped activities sharing the same driver

• Costs assigned to a single product

• Direct costs grouped together

Which of these activities is value-added?

• Inspection of defective products

• Assembly of components

• Storage of finished goods

• Reworking faulty items

What is the first step in implementing ABC?

• Identify cost drivers

• Determine cost pools

• Assign costs to products

• Analyze activities

Which of the following is NOT an advantage of ABC?

• Accurate product costing

• Improved decision-making

• Reduced implementation complexity

• Identification of cost drivers

Overhead costs in ABC are assigned based on

• Actual costs

• Direct labor hours

• Activity consumption

• Revenue generation