COST ACCOUNTING
ACTIVITY BASED MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Business has diverse product range, each consumes different amount of resources
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Business’s OH costs are highly related to the volume-based drivers
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Significant amount of OH costs are not directly related to production volume
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When the cost of implementing ABC is very high
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Detailed explanation-1: -Activity-based costing is especially useful to allocate indirect costs to items that are difficult to track and assign. The main benefit is more accurate product overhead costing.
Detailed explanation-2: -While ABC was designed to provide a more accurate allocation of overhead costs, it failed to gain widespread adoption because the technology of the time could not accurately track activity data. As a result, activity-based costing failed to live up to its promise, and many companies abandoned the approach.
Detailed explanation-3: -Answer and Explanation: The correct answer is False. Activity-based costing is not simply used to allocate manufacturing overhead costs to products, it is also often used to allocate selling, general, and administrative costs to produce for internal decision-making purposes.
Detailed explanation-4: -The correct answer is option C) more cost pools are used.