Chap 5 obj: 3

Which of the following statements is true of activity-based costing??

Activity-based costing classifies some of the indirect costs as direct costs

ABC system _____.

Highlights the different levels of activites

ABC systems create ______.

Homogeneous activity-related cost pools

Activity based costing systems differs from traditional costing system in the treatment of _____.

Indirect materials

A single indirect-cost rate distort product costs because ____.

There is an assumption that all support activities affect all products

Activity-based costing (ABC) can eliminate cost distortions because ABC systems _____.

establish a cause-and-effect relationship with the activities performed

Product lines that produce different variations (models, styles, or colors) often requires specialized manufacturing activities that translate into ______.

greater overhead costs for each product line.

Which of the following statements is true of activity-based costing?

Activity based costing is more suited to companies with high product diversity than companies with single product line.

Activity-based costing is not likely to yield benefit for companies _____.

with a complex product design processes