1- Which of the following costs is the most likely to be allocated to a product
ID: 2576888 • Letter: 1
Question
1- Which of the following costs is the most likely to be allocated to a product in a traditional job costing environment?
A. Direct materials
B. Direct labor
C. Manufacturing overhead
D. Selling and administrative
2. An allocation base that causes overhead costs to be incurred is called a:
A. revenue drives.
B. predetermined driver.
C. cost driver.
D. applied driver.
3. Which of the following statements is true regarding cross-subsidies
A. they occur when factory workers are trained to work on many different machines,
B. they occur when high-volume products are assigned more than their fair share of overhead costs,
C. they occur when high-volume products have more direct material and direct labor costs than overhead costs.
D. They occur when more than one cost driver cat he determined for a particular overhead cost item.
4. Which of the following is true regarding activity-based costing (ABC)?
A. The benefits of using ABC always outweigh its limitations.
B. the lower the proportion of Overhead costs as compared to direct materials and direct labor costs, the more likely a company, will benefit by using ABC.
C. Companies with a high-proportion of non-unit -level costs should rarely use ABC.
D. High measurement costs associated with ABC may deter some companies from its use.
Explanation / Answer
1.C. Manufacturing overhead.
(rest all are direct costs and need not be allocated, whereas overhead is an indirect cost and is to be allocated).
2.C. Cost driver
(it is the cost driver on the basis of which ovehead costs are incurred).
3.B.They occur when high volume products are assigned more than their share of overhead costs.
4.D. High measurement costs associated with ABC may deter some companies from its use.
(the beneifts of ABC may not always outweigh its costs)
(high proportion of overhead costs may be beneficial to use ABC).
(companies with high proportion of non unit level costs should use ABC frequently)
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