The Basic Concepts Involved in Activity-Based Costing (ABC) Can Be

question 32

True/False

The basic concepts involved in activity-based costing (ABC) can be used to determine customer profitability as well as product costs.

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Definitions:

Standard Costing

A cost accounting method that assigns predefined costs to direct materials, labor, and overhead, used to compare against actual costs for performance analysis.

Labour Efficiency Variance

The discrepancy between the actual hours worked and the standard hours expected to produce a certain level of output.

Variable Overhead

Costs that change in proportion with production volume or business activity levels, such as utilities or raw materials.

Labour Rate Variance

Labour rate variance is the difference between the actual hourly wage paid to workers and the standard wage rate expected, indicating variations in labor cost.