Question

1) Which of the following statement is true?

a. activity-based costing is a more detailed and complex costing method than is JIT costing

b. Activity-based costing and JIT costing are incompatible

c. Activity-based costing is a simplified cost system that does not track costs through the sequence of manufacturing operations

d. All of the above are true

2) Which of the following is a required step in an ABC system?

a. Estimate the total direct costs of each activity

b. Compute the overhead rate

c. Identify the costs

d. Obtain the actual quantity of each allocation base used by the cost object

Answer 1

Ans 1(a)	activity-based costing is a more detailed and complex costing method than is JIT costing
	Activity based Costing is a product costing method.
	Activity based costing is detailed and complex costing method.
	Activity based costing provides more detailed cost information.
	JIT is just an time inventory methods used by companies to increase efficiency and reduce cost but Activity based costing is used to accruate product cost for management decision.
	Activity based costing and JIT costing are not incompatible to each other.
Ans 2(d)	Obtain the actual quantity of each allocation base used by the cost object
	Mangements used 7 steps in Activity based costing.
1)	First step is to identify activity.
2)	Identify indirect cost of each activity.
3)	Identity allocation base for each activity.
4)	Estimate the total quantity of each allocation base.
5)	Obtain the actual quanity of each allocation base used by cost object.
6)	Compute the cost allocation rate for each activity.
7)	Allocate the costs to the cost object.