Essay Questions
133.Indicate whether each of the following statements is true or false.In an automated environment, use of a volume-based cost driver may undercost high-volume products.In an automated environment, an activity-based cost driver would provide for more accurate allocation of set-up costs than would a volume-based cost driver.Activity based costing is probably not cost beneficial for a company that makes very similar products.In an automated manufacturing environment, use of a volume-based cost driver could lead managers to make poor decisions.Activity based costing always delivers significantly more accurate cost allocation than does volume-based costing.
134.Indicate whether each of the following statements is true or false.The allocation of indirect costs using activity-based costing is a three-step process.The first stage of activity-based costing is to calculate activity rates.A typical business may engage in thousands of different activities.Determining the number of activity centers to use in an activity-based costing system should be based on a cost-benefit analysis.A traditional cost allocation system first assigns costs to activity centers and then uses a single volume-based cost driver to assign the costs to products.
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