Question

uestion 1

1. In a labor-intensive manufacturing company, overhead costs are usually assumed to be closely related to the level of direct labor hours.

   True

   False

4.09 points

Question 2

1. In a high-tech company, where production is highly automated, overhead costs are assumed to be closely related to the level of direct labor hours.

   True

   False

4.17 points

Question 3

1. Understanding the sources of overhead costs is necessary for a company to effectively compete in today's marketplace.

   True

   False

4.17 points

Question 4

1. Activity-Based Costing assumes that most overhead costs can be easily allocated based on one or two drivers.

   True

   False

4.17 points

Question 5

1. Activity-Based Costing presumes that all costs are static regardless of the level of activity or production, and seeks to fairly allocate those costs.

   True

   False

4.17 points

Question 6

1. Activity-Based Costing is based on a deep understanding of the activities that a company engages in while pursuing economic objectives.

   True

   False

4.17 points

Question 7

1. Under Activity-Based Costing, it is important for there to be a high correlation between the change in the level of costs and the change in the use of the driver on which those costs are allocated.

   True

   False

4.17 points

Question 8

1. It is not necessary for a cost driver to be closely related to the cost pool under Activity-Based Costing: the nature of the costing system permits the use of any driver, as long as it is consistently applied.

   True

   False

4.17 points

Question 9

1. It is better to base a predetermined overhead rate on the practical capacity of production rather than actual production.

   True

   False

4.17 points

Question 10

1. Production department overhead costs are those costs directly related to production, such as direct materials and direct labor.

   True

   False

4.17 points

Question 11

1. Support department costs come from departments that are not directly associated with production.

   True

   False

4.17 points

Question 12

1. Using Activity-Based Costing results in a different total amount of overhead allocated than that allocated under traditional costing models.

   True

   False

4.17 points

Question 13

1. An Activity-Based Costing system must be complex in order to be effective.

   True

   False

4.17 points

Question 14

1. Often a company will maintain their financial records using a traditional costing method, even if Activity-Based Costing is used to make management decisions.

   True

   False

4.17 points

Question 15

1. Increasing the number of cost pools in an Activity-Based Costing system will almost always result in cost savings.

   True

   False

4.17 points

Question 16

1. Most companies will initially switch all their financial records to an Activity-Based Costing method, because it facilitates auditing and tax preparation.

   True

   False

4.17 points

Question 17

1. A high-sales-volume customer may not necessarily be a profitable customer.

   True

   False

4.17 points

Question 18

1. Even if a company provides a standardized product or service, they may still have customers that are unprofitable.

   True

   False

4.17 points

Question 19

1. Dropping an unprofitable customer will always result in immediate improvements in company profits.

   True

   False

4.17 points

Question 20

1. A company should always drop an unprofitable customer.

   True

   False

4.17 points

Question 21

1. Activity-based management is an activity that is similar to Activity-Based Costing but requires a very different set of information.

   True

   False

4.17 points

Question 22

1. The information needed for activity-based management is a direct byproduct of Activity-Based Costing.

   True

   False

4.17 points

Question 23

1. Activity-based management is designed to help management know which activities add the most value to goods and services.

   True

   False

4.17 points

Question 24

1. While useful, activity-based management and Activity-Based Costing information is not always cost efficient to obtain.

   True

   False

Answer 1

Ans 1 True

Ans 2 True

Ans 3 True

Understanding the sources of overhead costs is necessary for a company to effectively compete in today's marketplace.

Ans 4 False

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