Question

27) A preliminary stage cost driver links costs of resources consumed in an activity
center to:
1. batch-level activities
2. products
3. cost functions
4. focused factories
5. other activity centers

28)In the step method of service center allocation, the number of allocation steps equals
the number of:
1. activities performed in all operating departments.
2. service centers.
3. operating departments.
4. service centers plus operating departments.
5. activities performed in all service centers.

30)Activity based costing:
1. uses fewer cost drivers than volume based costing.
2. must have both a preliminary stage and a primary stage.
3. is applicable to the costing of services.
4. uses cost drivers that reflect volume, but not complexity.
5. overcosts high-volume products and undercosts low-volume products.

Answer 1

27)A Preliminary stage cost driver links costs of resources consumed in an activity center to:

ANS)OTHER ACTIVITY CENTERS

Cost driver is the unit of an activity that causes the change in activity cost.Cost drivers are the link between activities and the cost.In preliminary stage cost driver the direct costs of unit level activity centers are assumed to be always traceable to specific product.

Batch level costs and direct costs are always traceable in primary cost drivers.

Primary stage cost drivers are link costs in an activity center directly with products.

Cost functions relate a cost to an activity level using a mathematical formula.it helps to build a better cost or activity relationship.

Factory costs related to activity based costing.it invoves direct and indirect costs

28)In the step method of service center allocation,the number of allocation steps equals the number of:

ANS:SERVICE CENTERS PLUS OPERATING DEPARTMENTS

Step method of service center allocation,allocates the cost of a service department to other service department as well as operating department as a sequential process.it starts with the allocation of cost of the service department that provides greatest amount service to other department and ends with the service department that provides least amount of service to other service departments.

29)Activity based costing:

ANS)IS APPLICABLE TO THE COSTING OF SERVICES

It allows service companies to reduce and control their costs inorder to make correct pricing and other decisions,and to increase their profitability.

Activity Based Costing assigns overhead and indirect costs related to product and services.

It uses multiple cost drivers to allocate costs.it is applicable in primary stage cost drivers because it link costs in an activity center directly with products.