In a Simple Activity-Based Product Costing System

question 74

Multiple Choice

In a simple activity-based product costing system:

• A) direct material, direct labour, manufacturing overhead and non-manufacturing overhead are assigned to products on an activity basis.
• B) direct material is traced using a traditional approach, while direct labour, manufacturing overhead and non-manufacturing overhead are assigned to products on an activity basis.
• C) direct material and direct labour are traced using a traditional approach, manufacturing overhead is assigned on an activity basis and non-manufacturing overhead is expensed as it is incurred.
• D) direct material, direct labour and manufacturing overhead are traced using a traditional approach, and non-manufacturing overhead is assigned on an activity basis.

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Definitions:

Pre-Tax Profits

The amount of earnings of a company before the deduction of taxes, serving as a key indicator of financial health and operational efficiency.

Bonus Pool

A fund allocated for bonuses, typically based on company performance, and distributed to employees based on predetermined criteria.

Fixed Percentage

A specified, constant proportion or rate that does not change with variation in base quantities, often used in financial contexts like interests or commissions.

Deferred Profit-Sharing Plans

A type of profit-sharing plan where contributions are deferred and placed in a trust for the employee until a set time, often retirement.