Question

Which includes Activity-Based Costing?A) 1. Costs of implementing ABC may outweigh the benefits. However, the benefits are more likely to be worth the costs when:a. Products differ substantially in volume, batch size, and in activities.b. Conditions have changed substantially since the existing cost system was established.c. OH costs are high and increasing and no one seems to understand why.d. Management does not trust the existing cost system and it ignores data from it when making decisions.

COMPB) 1. Departmental rates will not correctly assign overhead in situations where a company has a range of products and complex OH costs.
2. The departmental approach relies exclusively on volume-related allocation bases while some overhead costs may be caused by factors
that are not related to the volume of production.
3. Activity-based costing is required to account for these other factorsC) 1. The contribution margin format emphasizes cost behavior, by separating costs into fixed and variable categories. Contribution margin covers fixed costs and provides for income.
2. The CM format is used as an internal planning and decision making tool as illustrated in: cost-volume-profit analysis budgeting, and special decisions such as outsourcing
CID) 1. A method used to analyze mixed costs if a scattergraph plot reveals an approximately linear relationship between the X and Y variables.
2. This method uses all of the data points to estimate the fixed and variable cost components of a mixed cost.
3. The goal of this method is to fit a straight line to the data that [minimizes the sum of the squared errors.]
4 Software can be used to fit a regression line through the data points. The cost analysis objective is the same as
before: Y = a + bX
5. The output from the regression analysis can be used to create an equation that enables you to estimate total costs at any activity level.
SOFA-U

Answer 1

B) 1. Departmental rates will not correctly assign overhead in situations where a company has a range of products and complex OH costs.

2. The departmental approach relies exclusively on volume-related allocation bases while some overhead costs may be caused by factors

that are not related to the volume of production.

Activity-based costing is required to account for these other factors.