CHAPTER 4 - T/F

Question 1

Direct material costs and direct labor costs cannot be easily traced to products. Therefore, they are allocated to products.

Answer 1

FALSE

Question 2

Manufacturing overhead costs, which are also known as indirect costs, cannot be traced to products in a cost effective manner.

Answer 2

TRUE

Question 3

Product costs consist of only direct materials and direct labor.

Answer 3

FALSE

Question 4

Activity-based costing uses a common allocation base for all activities.

Answer 4

FALSE

Question 5

In ABC, each activity has its own (usually unique) allocation base.

Answer 5

TRUE

Question 6

Traditional costing provides more detailed information on costs of activities and the drivers of these costs than activity-based costing.

Answer 6

FALSE

Question 7

Activity-based costing refines the cost allocation process even more than traditional allocation costing systems.

Answer 7

TRUE

Question 8

Activity-based management (ABM) uses activity-based costs to make decisions that increase profits while meeting customer needs.

Answer 8

TRUE