Activity-Based Costing (ABC)

• Lesson
• Exercise
• Answer

With this overview in mind please answer the following questions (answers are below):

1. A Traditional costing model might entail which of the following aspects?

• A. An embroidered recognition of achievement affixed to a plaque
• B. The accounting practice of basing costs on machine usage per hour

Answers

• 1. B.
• 2. D.
• 3. A and D.
• 4. B.

• C. Conventional wisdom with regard to inventory depreciation methods
• D. Wages established by regional standards for a five year period

2. A company which routinely adjusts factory procedures to pursue impromptu opportunities might benefit from which of the following accounting models?

• A. Lone Wolf  Accounting Software
• B. Senate sub-committee accounting principles
• C. Labor Department pay rate guidelines
• D. Activity-based accounting model

3. How might the possession of the most accurate production costs benefit a company?

• A. Allow the sales team more certainty in marketing and promotion materials.
• B. Encourage competitors to utilize prison labor.
• C. Remove accounting method sanctions
• D. Facilitate project bids based on more accurate cost estimates

4. Which of the following might be a negative outcome resulting from utilizing the Traditional costing model?

• A. Negative Citing by the Basic Register of Illegal Activities
• B. Increased production without corresponding increased profits
• C. Increased incidence of basic occurrences
• D. Revocation of membership to Activity Based Council