COST ACCOUNTING
ACTIVITY BASED MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Only one homogenous product is produced on a continuous basis
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The existing cost system is reliable and predictable
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Overhead costs are high and increasing with no apparent reason
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The costs of implementing ABC outweigh the benefits
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Detailed explanation-1: -Which of the following characteristics would be an indicator that a company would benefit fromswitching to activity-based costing? Selected Answer:D. Overhead costs are high and increasing with no apparent reason.Answers:A. Only one homogenous product is produced on a continuous basis.
Detailed explanation-2: -Which of the following factors would suggest a switch to activity-based costing? Overhead costs constitute a significant portion of total costs.
Detailed explanation-3: -The factors that influence ABC adoption are decision usefulness of accounting information, organization support, and internal measures of performance.
Detailed explanation-4: -Activity-based costing provides a more accurate method of product/service costing, leading to more accurate pricing decisions. It increases understanding of overheads and cost drivers; and makes costly and non-value adding activities more visible, allowing managers to reduce or eliminate them.
Detailed explanation-5: -Activity-based costing allows you to figure those costs into your final product pricing, while also allowing you to make accurate, management-level decisions, such as relocating to a newer, more energy-efficient building, or reducing production during certain months of the year.