The Use of Activity-Based Costing in Service Industries

question 150

Multiple Choice

The use of activity-based costing in service industries

• A) has the same objective as in manufacturing.
• B) results in improved costing of services provided.
• C) uses cost pools to assign overhead.
• D) all of these.

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Definitions:

Labour Efficiency Variance

A cost management tool used to measure the difference between the actual labor hours used and the standard labor hours expected to produce a certain level of output.

Direct Labour Standard

A benchmark for the amount of work (measured in labor hours or costs) expected to produce a certain quantity of goods.

Uncontrollable Costs

Costs that cannot be influenced or controlled by a manager under normal circumstances.

Work In Process Inventory Account

This is an account in the ledger that tracks the cost of inventory not yet completed, including materials, labor, and overhead costs.