B3-M3

Question 1

Activity Based Costing (ABC)

Answer 1

• indirect costs should be assigned to benefitting products based on activities performed and resources consumed
• improves cost allocation
• emphasizes LT product analysis (when fixed costs become variable costs)
• can be used with process or job costing
• not acceptable for external reporting

Question 2

Cost driver

Answer 2

-factor that has the ability to change total costs

Question 3

Physical volume allocation method

Answer 3

(units of one products/units of both products)* joint costs

Question 4

Net sales (relative sales) value at split off

Answer 4

Sales price less the cost to complete after split off

-additional contribution to income generated by completing the product

Question 5

Allocation by relative sales value

Answer 5

(Priceunits produced/ priceunits of both products) *joint costs

Question 6

Allocation by relative net realizable value

Answer 6

Net realizable value of product/ net realizable value for both *joint costs
-Net realizable value= Sales- separable costs