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in activity-based costing, nonmanufacturing costs are not assigned to products.

True / False Questions  

1.Activity-based management seeks to eliminate waste by allocating costs to products that waste resources.    True    False
2.Direct labor-hours or direct labor cost should not be used as a measure of activity in an activity-based costing system.    True    False
3.In activity-based costing, nonmanufacturing costs are not assigned to products.    True    False
4.In traditional costing, some manufacturing costs may be excluded from product costs.    True    False
5.Organization-sustaining overhead costs should be allocated to products just like unit-level and product-level activities.    True    False
6.Activity-based costing uses a number of activity cost pools, each of which may have a different allocation base.    True    False
7.In activity-based costing, organization-sustaining costs should be included in product costs for internal management reports that are used for decision-making.    True    False
8.The practice of assigning the costs of idle capacity to products results in more stable unit product costs.    True    False
9.In general, duration drivers are more accurate measures of the consumption of resources than transaction drivers.    True    False
10.Activity-based costing is a costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect only variable costs.    True    False
11.In traditional costing systems, manufacturing costs that are not caused by products are not assigned to products.    True    False
12.When a company shifts from a traditional cost system in which manufacturing overhead is applied based on direct labor-hours to an activity-based costing system with batch-level and product-level costs, the unit product costs of low volume products typically decrease whereas the unit product costs of high volume products typically increase.    True    False
13.The costs of idle capacity should be assigned to products in activity-based costing.    True    False
14.In activity-based costing, some manufacturing costs can be excluded from product costs.    True    False
 15.Batch-level activities are performed each time a unit is produced.    True    False
Multiple Choice16.An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because:   A. under activity-based costing the sum of all product costs does not equal the total costs of the company.B. under activity-based costing manufacturing costs are assigned to products.C. activity-based costing has not been approved by the United Nation’s International Accounting Board.D. activity-based costing results in less accurate costs than more traditional costing methods based on direct labor-hours or machine-hours.
17.Assembling a product is an example of a(n):    A. Unit-level activity.B. Batch-level activity.C. Product-level activity.D. Organization-sustaining.
18.If substantial batch-level or product-level costs exist, then overhead allocation based on a measure of volume such as direct labor-hours alone:   A. is a key aspect of the activity-based costing model.B. will systematically overcost high-volume products and undercost low-volume products.C. will systematically overcost low-volume products and undercost high-volume products.D. must be used for external financial reporting since activity-based costing cannot be used for external reporting purposes.
19.Which terms would make the following sentence true? Manufacturing companies that benefit the most from activity-based costing are those where overhead costs are a _________ percentage of total product cost and where there is ___________ diversity among the various products that they produce.   A. low, littleB. low, considerableC. high, littleD. high, considerable
20.Which of the following costs should not be included in product costs for internal management reports that are used for decision-making?   A. Costs of unit-level activities.B. Costs of batch-level activities.C. Costs of product-level activities.D. Costs of organization-sustaining activities.
21.The plant manager’s salary is an example of a(n):    A. Unit-level activity.B. Batch-level activity.C. Product-level activity.D. Organization-sustaining activity.
22.Setting up a machine to change from producing one product to another is an example of a(n):    A. Unit-level activity.B. Batch-level activity.C. Product-level activity.D. Organization-sustaining activity.
23.Which of the following would probably be the most accurate measure of activity to use for allocating the costs associated with a factory’s purchasing department?   A. Machine-hoursB. Direct labor-hoursC. Number of orders processedD. Cost of materials purchased
24.The labor time required to assemble a product is an example of a(n):    A. Unit-level activity.B. Batch-level activity.C. Product-level activity.D. Organization-sustaining activity.
25.Which of the following levels of costs should not be allocated to products for decision-making purposes?    A. Unit-level activities.B. Batch-level activities.C. Product-level activities.D. Organization-sustaining activities.