Using an Activity-Based Costing System (ABC) Enables a Firm to Calculate

question 32

Multiple Choice

Using an activity-based costing system (ABC) enables a firm to calculate overhead variances for:

• A) Sales volume and production volume.
• B) Spending and selling price.
• C) Each activity-based cost driver.
• D) Semi-variable overhead costs.
• E) Semi-fixed overhead costs.

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Definitions:

Machine Hour

Refers to the total number of hours a piece of machinery or equipment is actually used in production, often used in allocating manufacturing costs based on machine hours.

Normal Capacity

Normal capacity is the expected production output or service level that a company can achieve under normal conditions, considering limitations such as time and resources.

Fixed Overhead Volume Variance

The difference between the budgeted and actual quantity of units produced, multiplied by the fixed overhead rate per unit.

Sales Orders

Formal documents issued by a buyer to a seller authorizing the sale of a specific quantity of goods at a specified price, which upon acceptance, becomes a contract.