30 Questions
What is a cost object in Activity-Based Costing (ABC)?
An item for which cost measurement is required, like a product or customer
In ABC, what does an activity cost driver measure?
Frequency and intensity of demand placed on activities by cost objects
What is the purpose of dividing activities into cost pools in ABC?
To include all individual costs related to an activity
Which of the following is NOT an example of a cost driver category in ABC?
Machine set-up
What represents a group of various individual cost items with the same cause-effect relationship in ABC?
Cost Pool
Why is Activity-Based Costing (ABC) mostly used in the manufacturing industry?
Because it enhances the reliability of cost data and better classifies costs incurred during production process
What is the purpose of issuing a corporate brochure?
To provide information about the company
What is the purpose of preparing a profit and loss statement and balance sheet?
To analyze the trial balance and prepare financial statements
What is the purpose of raising funds through methods like PPD, preference shares, and fixed deposits?
To park surplus funds and calculate interest
What is the purpose of advertising and analyzing feedback from sales?
To prepare MIS and sales projections
What is the purpose of dealing with auditors and banks for working capital and term loans?
To analyze the trial balance and prepare financial statements
What is the purpose of issuing share certificates and dealing with grievances?
To issue share certificates, handle grievances, and manage PF and government accounts
What can be more effectively controlled using the ABC approach?
Marketing and servicing costs
In an ABC environment, what initial work is required by team members?
Identifying activities and their present costs
What is the first step in creating a cost code in activity-based costing?
Identify activities
What is a common extreme cost reduction measure for firms facing financial challenges?
Layoffs
What should be included in the list of resources for each activity?
Material, equipment, labor hours, and subcontracting costs if applicable
How is the cost driver rate calculated?
Divide the total overhead by the total cost drivers
Which philosophy focuses on continuous improvement and serves as a good starting point in an ABC environment?
Total Quality Management (TQM)
What is the purpose of calculating the cost driver rate?
To allocate overhead costs to products or services
In what scenario would firms need to consider measures like divestitures?
When financial results are unacceptable to shareholders
In the example given, what is the cost driver used for the electricity bill?
Labor hours
What type of costs are highlighted as gaining importance in comparison to manufacturing costs?
Non-manufacturing costs
What is the next step after calculating the per-unit cost of each resource?
The process is complete after this step
What is the primary focus of Activity-Based Costing (ABC)?
Activity costs
Which of the following is NOT listed as a function under the allocation of power, water, steam to various activities?
Data feeding & printing
Which activity involves spending time meeting with overseas suppliers and buyers?
Holding meetings with overseas Supplier and buyer
In Activity-Based Costing, what is the term used for factors that determine the costs of activities?
Cost drivers
Which function involves analyzing Monthly Profit & Loss statements?
Analysis of MIS Report
What does ABC focus on, according to the provided text?
Activity costs
Learn the meaning of key terms used in Activity-Based Costing (ABC) such as activity, cost object, and cost driver. Understand how cost drivers help allocate activity costs to outputs effectively.
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