Question

True or False:

1) Direct labor costs are usually included in the costs that are allocated to activity cost pools in an activity-based costing system.

True or False:

2) In activity-based costing, a product margin may exclude costs from some of the company's activity cost pools.

Answer 1

1)FALSE

first of all let us inderstand that ABC costing system is used to allocate overhead costs.the idea is that each product requires specific support services.thus the cost should be allocated based on the the volume of the activities of theses support services associated with product

These costs hence , DO NOT include direct Labor costs instead the cost pools represent overhead costs associated with particular products.

2)TRUE.

numerous overhead cost pools are used, each of which is allocated to products and other cost objects using its own unique measure of activity

therefore suppose company has 2 products A and B.

Product B needs inspection cost because there are chances of faults in it because it has very delicate design.These are needed only for product B.

So when you compute you product margin For Product A you would not include Inspect costs in its overhead costs when using ABC coting system