Which of the following is the primary goal of Activity-Based Costing (ABC)?
a) To allocate costs based on the volume of production
b) To allocate overhead costs more accurately based on activities
c) To focus only on direct costs
d) To ignore indirect costs entirely
In Activity-Based Costing, overhead costs are assigned to:
a) Cost centers based on revenue
b) Products based on their consumption of activities
c) Direct labor hours only
d) All products equally
What is the first step in implementing Activity-Based Costing?
a) Identifying cost drivers
b) Assigning direct costs to products
c) Calculating product costs
d) Identifying activities that incur costs
Which of the following is an example of a cost driver in Activity-Based Costing?
a) Number of machine hours used
b) Total labor cost
c) Number of employees
d) Amount of raw materials purchased
In ABC, how are activity rates determined?
a) By dividing the total costs by the number of products produced
b) By dividing total overhead costs by the number of direct labor hours
c) By dividing total overhead costs by the total cost drivers
d) By multiplying the cost of each activity by its volume
Which of the following is NOT an activity that would be included in ABC?
a) Machine setup
b) Purchasing raw materials
c) Product distribution
d) General administrative costs
Which of the following is a disadvantage of Activity-Based Costing?
a) It helps allocate costs more accurately
b) It can be expensive and time-consuming to implement
c) It is easy to apply for large businesses
d) It eliminates the need for cost drivers
In Activity-Based Costing, indirect costs are assigned to products based on:
a) Direct materials used
b) The number of products produced
c) The activities that incur the costs
d) The labor hours worked
Which of the following activities would typically be considered a non-value-added activity in ABC?
a) Inspecting products
b) Designing products
c) Assembling products
d) Packaging products
Activity-Based Costing is most useful for companies that:
a) Have high direct labor costs
b) Produce a wide variety of products with differing activities
c) Operate with a single product line
d) Do not have significant overhead costs
Which of the following is an example of a batch-level activity in Activity-Based Costing?
a) Handling customer complaints
b) Machine setup for each production run
c) Storing raw materials
d) Inspecting a product after production
Which type of costing system is most likely to lead to cross-subsidization of products?
a) Job order costing
b) Activity-based costing
c) Process costing
d) Traditional costing system
Which of the following is an example of a product-level activity in ABC?
a) Setting up machines for a specific product
b) Repacking products into smaller quantities
c) Hiring and training employees
d) Marketing expenses for a specific product
Under Activity-Based Costing, costs are first assigned to:
a) Direct costs
b) Cost pools for each activity
c) The final product
d) General administrative costs
The main purpose of Activity-Based Costing is to:
a) Allocate direct costs to products
b) Assign overhead costs based on actual activities
c) Ignore indirect costs for simplicity
d) Simplify the cost allocation process
Which of the following is NOT an example of an activity that would be assigned costs in ABC?
a) Product design
b) Direct labor
c) Product inspection
d) Equipment maintenance
Which of the following is an example of a facility-level activity in ABC?
a) Machine maintenance
b) Assembling products
c) Packaging products
d) Advertising for the entire company
In ABC, the total cost of a product is determined by:
a) The volume of production
b) The overhead costs and direct costs associated with the activities performed
c) Only the direct costs incurred
d) The price of raw materials used
Which of the following is an example of an organization that could benefit most from using Activity-Based Costing?
a) A company that manufactures a single product
b) A fast-food restaurant with low overhead costs
c) A company that produces a range of customized products
d) A company with no direct labor costs
Which of the following is the key characteristic of activity-based costing?
a) Allocation of costs based on volume measures
b) Costs are assigned to activities rather than products
c) Costs are allocated based on the direct labor hours worked
d) Only direct costs are considered in the costing system
In ABC, a cost driver is:
a) A factor that causes the cost of an activity to change
b) The rate at which costs are allocated to activities
c) A measure of direct costs incurred
d) A cost incurred for an activity unrelated to product production
How is Activity-Based Costing different from traditional costing?
a) It allocates overhead based on a single cost driver
b) It does not allocate indirect costs
c) It allocates overhead based on multiple cost drivers related to activities
d) It only allocates direct costs
Which of the following is NOT a potential benefit of Activity-Based Costing?
a) Better cost control
b) More accurate product costing
c) More simplified cost allocation
d) Enhanced decision-making based on cost analysis
The cost of quality in ABC can include all of the following EXCEPT:
a) Prevention costs
b) Appraisal costs
c) Internal failure costs
d) External failure costs
