Consider a Situation Where an Activity-Based Costing System Is in Use

question 4

Multiple Choice

Consider a situation where an activity-based costing system is in use rather than a conventional volume-based costing system.Which of the following statements is/are true?

• A) The use of activity-based costing eliminates the need to consider qualitative factors.
• B) When an activity-based costing system is used,facility level costs will have to be analysed differently to the way they would be under a traditional volume-based costing system.
• C) When an activity-based costing system is used,unit level costs will have to be analysed differently to the way they would be under a traditional volume-based costing system.
• D) None of the given answers.

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Definitions:

Production Period

The time frame during which goods are manufactured or services are rendered, from the beginning of production to its completion.

Beginning Finished Goods Inventory

The value of a company’s finished goods inventory at the start of an accounting period before any sales or production.

Finished Goods Inventory

Inventory that has completed the manufacturing process but has not yet been sold to customers.

Cost of Goods Sold

Costs incurred directly from the production of goods a company offers for sale, covering material and labor expenses.