Traditional Costing and Activity-Based Costing Share Some Similarities, but Are

question 166

Short Answer

Traditional costing and activity-based costing share some similarities, but are also different in significant ways. For each statement below, indicate whether it is a characteristic of: (A)activity-based costing only, (T)traditional costing only, (B)both traditional and activity-based costing, or (X)neither traditional nor activity-based costing.
____ 1. Allocates direct costs to cost of goods sold
____ 2. Assigns manufacturing production costs to individual units in inventory
____ 3. Attempts to trace costs more accurately to products, product lines or departments
____ 4. Can employ multiple cost pools
____ 5. Commonly uses labour or machine hours as a cost allocation base
____ 6. Costs are assigned to units in the first stage; units to inventory in the second
____ 7. Requires judgment to develop allocation rates
____ 8. Multiple cost pools and drivers are used in the allocation process
____ 9. Originally developed primarily to assign costs to products for financial reporting
____ 10. Overhead costs are first assigned to pools, then allocated to individual units

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Definitions:

Uniform Commercial Code

A comprehensive set of laws that governs commercial transactions in the United States, aiming to standardize and simplify the process across state lines.

Requirements

Needs or conditions that must be met or complied with, often specified in a contract or by a product's design.

Warranty Liability

Liability attributed when the transfer of an instrument breaches a warranty associated with an instrument.

Good Faith

The honest intention to act without taking an unfair advantage over another party in a transaction.