True / False Questions
90.Traditional cost systems usually allocate overhead to products on the basis of direct labor.
True False
91.As companies have become more highly automated, overhead costs have become a larger part of total manufacturing cost.
True False
92.In a highly automated manufacturing company, labor costs vary considerably with volume of production.
True False
93.Many automated processes generate costs that have no cause and effect relationship with volume-based cost drivers.
True False
94.Anderson Company produces a variety of products, some in labor-intensive departments and some in heavily automated departments. Using a company-wide overhead allocation rate based on direct labor will result in overcosting some products and undercosting others.
True False
95.Companies operating in a highly automated environment that produce many different products with varying levels of production should use activity-based cost drivers to improve the accuracy of their cost allocations.
True False
96.Because volume-based allocation rates assign more cost to high-volume products, low-volume products are often undercosted.
True False
97.The first step in implementing an activity-based costing system is to trace overhead costs to one or more departments.
True False
98.One of the advantages of activity-based costing systems over traditional systems is that ABC systems require less record-keeping.
True False
99.Unit-level activity costs follow a fixed cost behavior pattern (i.e., such costs vary on a per unit basis but are constant in total).
True False