Which of the Following Are Advantages of an Activity-Based Costing

question 73

Multiple Choice

Which of the following are advantages of an activity-based costing approach to cost volume profit (CVP) analysis as compared to a CVP analysis based on traditional product costing?

• A) Unit variable costs are recognised more clearly.
• B) Fixed costs are viewed as fixed only with respect to changes in sales and production volume, but not as fixed with respect to changes in other cost drivers such as number of set-ups and number of material moves.
• C) The assumption in traditional CVP analysis that sales and production volumes are equal can be relaxed.
• D) Unit variable costs are recognised more clearly AND fixed costs are viewed as fixed only with respect to changes in sales and production volume, but not with respect to changes in other cost drivers such as number of set-ups and number of material moves.

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Definitions:

No Interest

This term describes financial agreements or products that do not accrue interest.

Postpone

To delay an event or action to a later time.

Per Annum

Annually or per year, often used in the context of interest rates or salaries.

Term Deposit

A type of bank deposit that has a fixed term and typically offers a higher interest rate than savings accounts.