Which of the Following Statements Is True About Activity-Based Costing

question 29

Multiple Choice

Which of the following statements is true about activity-based costing?

• A)Only one activity should be used for a company.
• B)Many different activity bases are used in applying overhead.
• C)There can only be one cost driver.
• D)Direct materials and direct labor are applied to work-in-process based upon cost drivers.

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Definitions:

Direct Materials

Raw materials that are directly used in the production of goods and can be easily traced to the product.

Direct Labour

The workforce directly involved in manufacturing goods or providing services, where their labor can be directly tied to end products.

Variable Manufacturing Overhead

Costs in the production process that vary with the level of output, such as utilities for the machinery.

Specialized Machine Cost

The acquisition and operational costs associated with machinery that is designed for specific, specialized tasks in production.