Question

3a)Which group of the following manufacturing cost elements occurs in a process cost system?

	a.	Direct labour and direct material.
	b.	Direct labour and conversion costs.
	c.	Direct materials, direct labour, and manufacturing overhead.
	d.	Manufacturing overhead and conversion costs.

3b)

For which one of the following would a process cost system most likely be used?

	a.	cruise ships
	b.	motion pictures
	c.	potato chips
	d.	custom furniture

3c)

The primary benefit of ABC is it provides

	a.	more accurate product costing.
	b.	more cost pools.
	c.	faster management decisions.
	d.	enhanced control over overhead costs.

3d)

The primary benefit of ABC is it provides

	a.	more accurate product costing.
	b.	more cost pools.
	c.	faster management decisions.
	d.	enhanced control over overhead costs.

Answer 1

3-a) The answer is option - C) Direct Materials, Direct Labor and Manufacturing Overhead

Process costing is a term to describe method for collecting and assigning manufacturing costs to units produced. It is used when there is a mass production of nearly identical units.

3-b) The answer is option - A) Cruise Ships

Process costing is used when there is a huge number of homogeneous products are to be produced and output of one process is a input of another. Manufacturing of cruise ships involves multiple processes like body, panting, engine assemble etc. of the ship

3-c) The answer is option - A) More accurate product costing

Activity Based Costing assign ovehead and indirect costs to products that are non- value adding activities more visible. It allows a manager to reduce or eliminate them so that product cost will be more accurate.

3-d) same as above 3-c

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