Activity-Based Costing Systems

question 1

Multiple Choice

Activity-based costing systems:

• A)use a single, volume-based cost driver.
• B)assign overhead to products based on the products' relative usage of direct labour.
• C)often reveal products that were undercosted or overcosted by traditional product costing systems.
• D)typically use fewer cost drivers than more traditional costing systems.
• E)have a tendency to distort product costs.

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Definitions:

Manufacturing Business

A company engaged in the production of goods by processing raw materials into finished products.

Merchandising Business

A type of business that purchases goods for resale to customers, making profits from the markup over the cost of goods sold.

Limited Liability Company

An organizational form blending the direct tax system of a sole proprietorship or partnership with the reduced liability features of a corporation.

Cost Concept

An accounting principle that states all assets and services purchased by a company should be recorded at their cost price.