A limitation of volume-based costing is that it:

B. Ignores differences in complexity of production

Traditional cost systems typically assign overhead using:

B. Unit- or volume-based cost drivers

A studio records music for both small indie artists and major labels. How should overhead costs be allocated?

C. Using different cost pools for different activities

In a recording studio, which would be considered a facility-level activity?

C. Renting and maintaining the studio space

What was the significance of Thomas Edison's phonograph invention?

B. It was the first device capable of recording and playing back sound

What is the main purpose of Activity-Based Costing (ABC)?

B. To assign indirect costs more accurately to products/services

Which of the following is NOT a characteristic of ABC?

C. Only applies to manufacturing companies

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ABC Costing part 1

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Questions 10

Answers

1
Which of the following is a batch-level activity?
D. Product design
B. Assembling a single unit
A. Machine setups
C. Factory rent
2
A limitation of volume-based costing is that it:
B. Ignores differences in complexity of production
D. Reduces the need for cost allocation
A. Accurately reflects costs for all products
C. Is only used in service industries
3
Which of these businesses is most likely to benefit from ABC?
C. A gas station
D. A small corner grocery store
A. A fast-food restaurant with identical burgers
B. A custom furniture workshop
4
Traditional cost systems typically assign overhead using:
D. Customer-level cost drivers
A. Non-volume-based cost drivers
B. Unit- or volume-based cost drivers
C. Activity-based cost drivers
5
A studio records music for both small indie artists and major labels. How should overhead costs be allocated?
B. Based on total number of albums produced
D. By charging a flat fee for all services
A. Equally across all artists
C. Using different cost pools for different activities
6
In a recording studio, which would be considered a facility-level activity?
B. Setting up microphones for a band session
D. Mixing a song after recording
A. Recording a song
C. Renting and maintaining the studio space
7
What was the significance of Thomas Edison's phonograph invention?
C. It was the first electric musical instrument
A. It was the first device to play music
D. It was the first radio broadcasting system
B. It was the first device capable of recording and playing back sound
8
What is the main purpose of Activity-Based Costing (ABC)?
A. To allocate overhead based on direct labor hours
D. To replace traditional financial accounting
B. To assign indirect costs more accurately to products/services
C. To reduce the need for cost allocation
9
Which of the following is NOT a characteristic of ABC?
A. Uses multiple cost drivers
C. Only applies to manufacturing companies
B. Focuses on activities rather than just volume
D. Improves cost accuracy
10
What year was Thomas Edison granted the patent for the phonograph?
D. 1855
C. 1920
A. 1890
B. 1878

ABC Costing part 1 Flashcards | StudBud