Activity Based costing system

Question 1

What is the primary purpose of an activity based costing system?

Answer 1

To allocate overhead costs more accurately to products based on the activities that generate costs.

Question 2

True or False: Activity based costing can help identify non-value-added activities.

Answer 2

True

Question 3

Fill in the blank: In activity based costing, costs are assigned to ______ based on the activities involved.

Answer 3

cost objects

Question 4

Which of the following is a key component of activity based costing? A) Direct materials B) Activity cost pools C) Fixed costs

Answer 4

B) Activity cost pools

Question 5

What is an activity cost pool?

Answer 5

A collection of costs related to a specific activity within the organization.

Question 6

True or False: Activity based costing is only useful for manufacturing companies.

Answer 6

False

Question 7

What is a cost driver in the context of activity based costing?

Answer 7

A factor that causes a change in the cost of an activity.

Question 8

Multiple choice: Which of the following is NOT a benefit of activity based costing? A) Improved cost accuracy B) Simplified cost management C) Better decision-making

Answer 8

B) Simplified cost management

Question 9

Short answer: Name one limitation of activity based costing.

Answer 9

It can be time-consuming and expensive to implement.

Question 10

What is the difference between traditional costing and activity based costing?

Answer 10

Traditional costing allocates overhead based on a single cost driver, while activity based costing uses multiple cost drivers based on activities.