Question

Which of the following statement is TRUE?

a.Fixed manufacturing overhead is treated as a period cost under abosrption costing method.

b.The term contribution margin appears in the income statement prepared using the absorption costing approach.

c.Variable costing method is used in external financial reporting

d.Fixed manufacturing overhead is treated as a product cost under absorption costing method

e.Absorption costing method is more useful than variable costing approach in managerial accounting and internal decision-making purposes.

Which of the following statement is true regarding activity-based costing (ABC) and activity-based management systems (ABM)?

a. ABC assigns overheads to products based on products' usage of direct labour

b.Value chain analysis cannot be performed in conjunction with ABM

c.ABC uses fewer cost drivers than traditional costing systems

d.ABC tends to over-costs high volume products and under-costs low volume products

e.ABC and ABM are appropriate for multiple products with different manufacturing processes and complexities.

Answer 1

Which of the following statements are TRUE?

(a) FALSE , fixed manufacturing overhead is treated as product cost and not period cost under Absorption Method.

(b) FALSE, Contribution margin doesnt appear on income statement under Absorption Method.

(c) FALSE, Variable Costing method is used mainly for internal financial reporting.

(d) TRUE, fixed manufacturing overhead is treated as product cost under Absorption Method.

(e) FALSE, Variable Costing Method is used for managerial accounting and internal decision making process and not absorption costing method.

Which of the following statement is true regarding activity-based costing (ABC) and activity-based management systems (ABM)?

(a) FALSE, ABC assigns overhead costs based on relevant cost drivers.

(b) FALSE, can be performed together.

(c) FALSE, ABC used more cost drivers than Traditional costing.

(d) FALSE, Traditional Costing tends to over-costs high volume products and under-costs low volume products and not ABC.

(e) TRUE, ABC and ABM are appropriate for multiple products with different manufacturing processes and complexities.