Advanced Managerial Accounting Issues Practice Test
- Which of the following is the primary benefit of target costing?
A. It reduces the amount of overhead allocated to products.
B. It helps in setting a competitive price based on market conditions.
C. It focuses on managing quality costs during production.
D. It eliminates the need for budgeting. - Activity-based costing (ABC) is primarily used to:
A. Allocate overhead costs more accurately by tracing costs to specific activities.
B. Determine the price of a product based on market competition.
C. Reduce the complexity of financial reporting for managers.
D. Eliminate the need for traditional costing methods. - Activity-based management (ABM) helps managers:
A. Focus on market share analysis.
B. Identify and eliminate non-value-added activities.
C. Assess the profitability of individual products.
D. Minimize direct labor costs. - Which of the following is NOT an advantage of activity-based costing (ABC)?
A. It enhances product costing accuracy.
B. It provides a detailed analysis of cost behavior.
C. It simplifies cost allocation for large organizations.
D. It helps identify inefficient processes. - In the context of strategic management accounting, which is a key element?
A. Decision-making based on short-term costs.
B. Aligning the organization’s goals with its financial and strategic objectives.
C. Focusing only on the company’s profitability.
D. Reducing the cost of direct materials. - What does quality cost management focus on?
A. Reducing overhead costs in manufacturing.
B. Minimizing product returns by improving quality.
C. Controlling direct labor costs.
D. Estimating the cost of defective products. - Which of the following is NOT considered a quality cost?
A. Prevention costs
B. Internal failure costs
C. External failure costs
D. Marketing costs - What is the primary goal of activity-based management (ABM)?
A. Reducing fixed overhead costs.
B. Focusing on maximizing the capacity of high-cost activities.
C. Improving process efficiency and effectiveness.
D. Increasing product prices based on market competition. - Which of the following is an emerging issue in managerial accounting?
A. Traditional cost allocation methods.
B. The use of lean accounting principles.
C. Maximizing product output without considering quality.
D. The reliance on financial accounting for decision-making. - What is the purpose of capacity measurement in managerial accounting?
A. To determine the efficiency of the organization’s pricing strategy.
B. To evaluate whether the organization can meet current and future demand.
C. To calculate the break-even point for products.
D. To analyze changes in product costs over time. - The main purpose of target costing is to:
A. Increase the cost of products to maximize profit margins.
B. Decrease the cost of production by reducing waste and inefficiencies.
C. Determine the maximum possible price customers are willing to pay.
D. Focus solely on controlling labor costs. - Which of the following is an activity-based costing (ABC) method used for allocating overhead costs?
A. Direct labor hours.
B. Machine hours.
C. Activity drivers.
D. Traditional cost allocation. - The balanced scorecard method in strategic management accounting measures:
A. Customer satisfaction and employee performance.
B. Financial performance only.
C. Managerial decision-making effectiveness.
D. Product quality and production cost savings. - A quality cost system helps managers by:
A. Identifying all fixed costs associated with production.
B. Separating costs related to quality from all other operational costs.
C. Increasing production rates without improving quality.
D. Allocating overhead costs equally across departments. - Which of the following is a typical characteristic of an emerging accounting issue?
A. It is widely accepted and used across all industries.
B. It involves significant changes to existing accounting standards.
C. It primarily affects financial accounting rather than managerial accounting.
D. It is unrelated to cost management techniques. - When implementing activity-based costing (ABC), organizations should focus on:
A. Reducing direct labor costs.
B. Identifying significant activities and allocating overhead based on those activities.
C. Maximizing output and minimizing input costs.
D. Setting prices based on market demand rather than cost analysis. - What is an example of a prevention cost in quality management?
A. Rework costs.
B. Inspection costs.
C. Training employees in quality standards.
D. Warranty repair costs. - Which of the following is considered a key feature of activity-based costing (ABC)?
A. Using a single cost driver for overhead allocation.
B. Reducing cost information accuracy.
C. Identifying activities that consume resources and assigning costs to them.
D. Focusing solely on fixed costs. - In target costing, the target cost is calculated as:
A. The expected selling price minus the desired profit margin.
B. The total cost of production including all direct and indirect costs.
C. The cost of direct labor only.
D. The cost of raw materials used in production. - Which of the following best describes activity-based management (ABM)?
A. A method used to allocate fixed costs based on product volume.
B. A technique for improving efficiency by analyzing activities and costs.
C. A process focused solely on improving financial reporting.
D. A strategy for maximizing tax deductions in a company. - Which of the following is a common objective in emerging accounting issues?
A. Simplifying traditional accounting practices.
B. Developing new approaches to decision-making that consider environmental factors.
C. Focusing only on short-term financial performance.
D. Maintaining the status quo in cost allocation. - Which of the following is an activity driver in ABC?
A. Direct materials.
B. Labor hours.
C. Machine hours.
D. None of the above. - In the context of activity-based costing, which of the following is an indirect cost?
A. Direct labor
B. Direct materials
C. Depreciation on factory machinery
D. Sales commissions - What does the term “capacity” refer to in managerial accounting?
A. The ability to meet current and future demand for goods and services.
B. The total fixed costs incurred by the organization.
C. The available inventory at the end of the period.
D. The profitability margin of the company. - What type of cost is associated with the activity of reworking defective products?
A. Prevention cost
B. Internal failure cost
C. External failure cost
D. Appraisal cost - Which of the following is an example of an emerging accounting issue?
A. Increased use of non-GAAP measures.
B. Traditional overhead allocation.
C. Overemphasis on financial statements for decision-making.
D. Simple cost allocation methods. - In the balanced scorecard approach, customer perspective includes:
A. Tracking financial performance exclusively.
B. Analyzing market share and customer satisfaction.
C. Focusing on employee productivity.
D. Measuring internal process efficiency. - Which of the following is a typical feature of activity-based costing (ABC)?
A. Overhead costs are allocated based on direct labor hours.
B. All products are assigned the same overhead costs.
C. Overhead costs are traced to specific activities and then allocated based on their use.
D. The focus is on cost reduction at the product level only. - What is the objective of measuring quality costs?
A. To minimize all costs related to quality improvement.
B. To understand the total cost of maintaining quality and identify areas for improvement.
C. To determine the price at which products should be sold.
D. To allocate overhead costs more efficiently. - In activity-based costing, the term “cost driver” refers to:
A. The type of cost that is easiest to track.
B. An activity that drives the cost of producing a product.
C. The method used to allocate fixed costs.
D. A direct labor cost that is assigned to all products.
- In Activity-Based Costing (ABC), overhead costs are allocated to:
A. Each department equally.
B. Products based on their usage of specific activities.
C. Products based on direct material costs.
D. Only fixed costs. - The process of reducing waste in production and improving the quality of products is called:
A. Target costing.
B. Lean accounting.
C. Financial accounting.
D. Activity-based costing. - In the context of strategy and management accounting, which of the following focuses on continuous improvement in business processes?
A. Business process reengineering.
B. Target costing.
C. Total quality management (TQM).
D. Standard costing. - Which of the following would be an example of an internal failure cost in quality management?
A. Cost of rework.
B. Cost of scrap.
C. Warranty claims.
D. Inspection costs. - What is the main goal of activity-based management (ABM)?
A. To reduce the complexity of financial reporting.
B. To improve the efficiency of activities and reduce waste.
C. To provide a framework for pricing products.
D. To allocate overhead costs more easily. - What is the focus of capacity management in managerial accounting?
A. To assess the organization’s ability to meet production demands.
B. To reduce operating costs by increasing production efficiency.
C. To allocate production costs between fixed and variable categories.
D. To ensure the pricing strategy aligns with market conditions. - In target costing, the target cost is calculated by:
A. Subtracting the desired profit margin from the selling price.
B. Adding the desired profit margin to the production cost.
C. Using historical cost data to estimate future costs.
D. Allocating a percentage of overhead to each product. - In activity-based costing, a cost driver is:
A. A variable that drives the need for direct labor.
B. A cost that is influenced by market prices.
C. A factor that causes overhead costs to be incurred.
D. A cost that is shared equally among all products. - The concept of “emerging issues” in managerial accounting refers to:
A. Well-established techniques used for cost allocation.
B. New challenges and trends that affect managerial accounting practices.
C. Issues that arise from tax reporting requirements.
D. The traditional application of financial accounting methods. - Which of the following is an example of an emerging accounting issue in managerial accounting?
A. The use of lean manufacturing to reduce waste.
B. The growing importance of sustainability reporting.
C. Cost allocation based on traditional methods.
D. Standard cost systems in manufacturing. - Which of the following would be an example of an external failure cost in quality management?
A. Costs related to product defects discovered during production.
B. Costs for training employees to improve quality.
C. Costs of warranty claims after a product is sold.
D. Costs of inspecting materials before use in production. - Activity-based costing is particularly useful in environments where:
A. All products use the same amount of overhead.
B. Overhead is a small proportion of total costs.
C. There is significant overhead and products consume activities in different amounts.
D. Fixed costs are the primary cost driver. - What is the key benefit of using activity-based costing (ABC) in decision-making?
A. It simplifies cost allocation by using a single cost driver.
B. It improves the accuracy of product cost allocation by linking overhead to specific activities.
C. It eliminates the need for direct labor cost tracking.
D. It focuses on reducing the overall production cost across all products. - A company uses target costing to control its product costs. The target cost is calculated by:
A. Subtracting the desired profit from the selling price.
B. Adding the cost of materials to the direct labor cost.
C. Allocating overhead costs evenly across all products.
D. Increasing the selling price to cover production expenses. - In a competitive market, target costing encourages:
A. Focus on cost reduction by minimizing production inefficiencies.
B. Maintaining current pricing strategies regardless of market conditions.
C. Focusing on maximizing profit margins at any cost.
D. Limiting the use of technology to reduce production costs. - Which of the following is the most important benefit of using lean accounting in manufacturing?
A. It helps to minimize overhead costs.
B. It ensures the company maintains maximum profit margins.
C. It improves process efficiency and reduces waste.
D. It shifts the focus to managing financial accounting only. - Which of the following is an example of an activity driver in ABC?
A. Cost of raw materials.
B. Number of machine hours used in production.
C. Direct labor wages.
D. Total production cost. - The primary purpose of strategy and management accounting is to:
A. Allocate costs based on historical performance.
B. Align organizational goals with the financial and operational strategy.
C. Focus solely on financial reporting.
D. Maximize fixed overhead costs. - Which of the following is a cost that is part of the activity-based costing (ABC) system?
A. Selling and administrative expenses.
B. Activity costs associated with specific processes and products.
C. Direct labor costs.
D. Variable overhead costs. - In the context of quality costs, “prevention costs” refer to:
A. Costs incurred to repair defective products after they’ve been sold.
B. Costs incurred to avoid defects, such as training or process improvement.
C. Costs associated with reworking defective products.
D. Costs for monitoring and inspecting products during production. - Which of the following activities is primarily associated with target costing?
A. Reducing direct labor costs by improving worker efficiency.
B. Setting a competitive price and designing a product to meet that price while ensuring a desired profit.
C. Allocating overhead based on production volume.
D. Developing financial reports to assess company profitability. - Which of the following statements best describes activity-based management (ABM)?
A. It is a method used for budgeting.
B. It is focused on maximizing revenue by increasing product prices.
C. It involves improving cost efficiency by analyzing activities and eliminating waste.
D. It is used to allocate fixed costs equally across all departments. - In strategic management accounting, the focus is on:
A. Short-term profits.
B. Long-term strategic decision-making and alignment with company goals.
C. Financial accounting only.
D. Reducing variable costs to maximize profits. - Which of the following is NOT a characteristic of activity-based costing (ABC)?
A. It assigns costs based on the activities that drive those costs.
B. It helps identify inefficient processes that should be eliminated.
C. It reduces the complexity of cost allocation.
D. It is particularly useful for complex, resource-intensive processes. - Which of the following would be considered an emerging accounting issue in the future?
A. Applying activity-based costing in all industries.
B. Using sustainability and environmental cost reporting.
C. Replacing traditional cost allocation methods with standard costing.
D. Focusing on profitability margins without considering other costs. - The concept of “emerging accounting issues” typically involves:
A. The use of advanced accounting techniques that are not yet widely adopted.
B. The adaptation of established accounting practices to meet evolving business environments.
C. The replacement of traditional cost accounting systems with real-time tracking methods.
D. None of the above. - In activity-based costing (ABC), what is the purpose of assigning costs to activities?
A. To determine the amount of fixed costs to allocate.
B. To improve cost allocation accuracy by linking overhead to activities.
C. To reduce direct material costs.
D. To calculate the selling price of products. - A company’s capacity management system should:
A. Focus solely on maximizing profit.
B. Help ensure the company has enough resources to meet customer demand.
C. Allocate overhead based on historical data.
D. Eliminate the need for budgeting. - Which of the following is true about the balanced scorecard?
A. It only tracks financial performance.
B. It focuses on measuring customer satisfaction, internal processes, and employee learning.
C. It is only used in manufacturing industries.
D. It measures financial success only. - The emerging issue of sustainability accounting involves:
A. Focusing exclusively on short-term financial returns.
B. Considering environmental and social costs in decision-making.
C. Allocating all resources to profit-maximizing activities.
D. Focusing solely on the economic aspects of business.
- The concept of activity-based management (ABM) is primarily focused on:
A. Reducing the level of direct labor costs.
B. Improving the efficiency of processes and reducing waste.
C. Allocating fixed costs equally across all activities.
D. Increasing production capacity to meet market demands. - In the context of target costing, the target cost is determined by:
A. Subtracting the desired profit margin from the market-driven selling price.
B. Adding fixed and variable costs to the desired profit margin.
C. Estimating the historical production costs and adjusting them.
D. Increasing the cost of production to improve quality. - A company’s management accounting system that includes elements such as cost management, strategic planning, and operational control is called:
A. Activity-based costing (ABC).
B. Strategic cost management.
C. Traditional cost accounting.
D. Cash flow management system. - Which of the following is an example of an activity cost pool in activity-based costing (ABC)?
A. Sales commissions.
B. Assembly labor.
C. Advertising expenses.
D. Machine setup costs. - The role of strategic cost management in business includes:
A. Ensuring accurate financial reporting.
B. Allocating fixed costs across departments.
C. Helping a business achieve its long-term strategic goals through cost control and allocation.
D. Focus solely on reducing operational costs in production. - Which of the following best defines the term ‘capacity utilization’ in managerial accounting?
A. The actual number of products sold in a given period.
B. The amount of output produced relative to the maximum possible output.
C. The total cost of materials used in production.
D. The total number of hours worked by employees. - In activity-based costing (ABC), which of the following is considered a cost driver?
A. The number of machine hours used.
B. The fixed costs of the business.
C. The product’s selling price.
D. The direct labor wages of the employees. - Which of the following best describes the purpose of measuring and managing quality costs?
A. To determine the profitability of individual products.
B. To identify, control, and reduce costs associated with poor quality.
C. To increase the number of products produced.
D. To assign costs to specific departments. - The quality cost category “appraisal costs” refers to:
A. Costs associated with inspecting and testing products to ensure they meet quality standards.
B. Costs of warranty repairs after the product is sold.
C. Costs incurred due to product defects identified by customers.
D. Costs of training employees in quality management. - Which of the following is an emerging issue in managerial accounting related to technology?
A. The increased use of lean accounting to reduce production costs.
B. The integration of artificial intelligence in cost management and forecasting.
C. The standardization of accounting practices across all industries.
D. The reduction in importance of cost allocation systems. - In the context of sustainability accounting, companies report on which of the following?
A. Only the financial performance of the company.
B. The company’s efforts to improve operational efficiency without regard to environmental impact.
C. Environmental, social, and governance (ESG) factors along with financial performance.
D. Only social impact metrics. - What is the main benefit of using activity-based costing (ABC) over traditional costing methods?
A. It eliminates the need for budgeting.
B. It more accurately assigns costs based on the activities that cause them.
C. It reduces the complexity of accounting by using fewer cost pools.
D. It focuses on variable costs only. - In a cost hierarchy, which of the following is classified as a facility-level cost?
A. Direct labor.
B. Machine maintenance costs.
C. Administrative salaries.
D. Inspection costs. - What is the primary goal of lean accounting?
A. To focus on reducing non-value-added activities and costs.
B. To maximize production capacity regardless of cost.
C. To ensure that all accounting practices comply with international standards.
D. To simplify financial statements for external reporting. - Activity-based costing (ABC) allocates overhead based on:
A. The sales revenue generated by each product.
B. The amount of machine hours used in production.
C. The direct material costs of each product.
D. The total fixed costs of the company. - A key difference between traditional costing and activity-based costing (ABC) is that ABC:
A. Allocates overhead based on direct labor hours.
B. Assigns costs to products based on the activities that drive those costs.
C. Does not consider fixed costs in overhead allocation.
D. Focuses solely on direct material costs. - Which of the following is a limitation of activity-based costing (ABC)?
A. It is too simple to capture the complexities of production.
B. It is not suitable for companies with a low level of overhead costs.
C. It is only applicable to service industries.
D. It requires more detailed data and is more time-consuming to implement. - Which of the following strategies is associated with managing the cost of quality in a production process?
A. Increasing the inspection process to identify defective products.
B. Outsourcing quality control to reduce in-house costs.
C. Reducing the level of customer feedback received.
D. Focusing on rework and scrap reduction strategies only. - Which of the following best describes the role of cost behavior analysis in managerial accounting?
A. To determine the pricing structure for products and services.
B. To understand how different types of costs change in relation to production volume.
C. To allocate overhead to various departments.
D. To simplify the budgeting process. - In target costing, the company tries to:
A. Set the highest possible price for the product.
B. Design the product to meet a desired price while achieving a target cost and profit.
C. Eliminate all non-value-added costs in the production process.
D. Focus on maximizing direct material costs. - Which of the following is a characteristic of a successful cost management strategy?
A. It focuses solely on cutting fixed costs.
B. It ignores the role of quality in product pricing.
C. It aims to align costs with the company’s strategic goals.
D. It aims to achieve the lowest possible cost, regardless of quality. - Which of the following methods helps companies to improve their pricing strategies?
A. Traditional costing.
B. Target costing.
C. Absorption costing.
D. Activity-based management. - The process of allocating costs in activity-based costing (ABC) is intended to:
A. Simplify the pricing process for products.
B. Allocate costs based on how much each product uses activities.
C. Eliminate unnecessary costs.
D. Increase production efficiency across all products. - A primary goal of cost management is to:
A. Maximize overhead costs.
B. Increase the amount of fixed costs in the production process.
C. Align the cost structure with the company’s strategic goals.
D. Focus on increasing variable costs to improve flexibility. - Which of the following is true regarding activity-based costing (ABC) compared to traditional costing?
A. ABC allocates costs to products based on their actual use of activities.
B. ABC uses a single cost driver for all products.
C. ABC is only applicable in large-scale manufacturing environments.
D. ABC is easier to implement than traditional costing. - In a just-in-time (JIT) production environment, a company would typically:
A. Increase inventory levels to avoid production delays.
B. Minimize inventory levels and aim to produce goods only when they are needed.
C. Allocate costs evenly across all products.
D. Focus on maximizing production rates without regard to cost. - The use of benchmarking in cost management involves:
A. Setting internal targets for cost performance based on historical data.
B. Comparing the company’s cost performance against industry standards or competitors.
C. Estimating the cost of new product introductions.
D. Focusing only on labor cost efficiency. - A key challenge in managing the cost of quality is:
A. Ensuring that all costs are fully absorbed by the product price.
B. Reducing quality control to save costs.
C. Balancing the cost of quality with the benefits of improved products and customer satisfaction.
D. Focusing only on reducing direct costs. - Which of the following would be classified as an external failure cost in quality management?
A. Rework costs.
B. Training costs.
C. Warranty claims.
D. Inspection costs. - Which of the following is a characteristic of emerging accounting issues related to managerial accounting?
A. A focus on improving traditional cost allocation methods.
B. The introduction of new technologies to enhance decision-making and efficiency.
C. A decrease in the importance of activity-based costing.
D. A shift towards using fewer cost drivers for overhead allocation.
- Which of the following is an example of a direct cost in the context of activity-based costing (ABC)?
A. Marketing expenses.
B. Direct materials used in production.
C. Depreciation of factory buildings.
D. Administrative salaries. - What is the primary focus of strategy-based management accounting?
A. To allocate costs based on volume of production.
B. To provide information that helps align the company’s resources with its strategic goals.
C. To track only financial performance of the organization.
D. To reduce all non-manufacturing costs. - What is the main objective of using target costing in pricing decisions?
A. To maximize the cost per unit of production.
B. To determine the minimum acceptable profit margin.
C. To set a target cost that allows the company to meet its desired profit at a competitive price.
D. To increase the markup on each unit sold. - Which of the following is a component of the cost of quality that is categorized under “prevention costs”?
A. Product inspection costs.
B. Warranty expenses.
C. Training employees in quality management techniques.
D. Costs of rework on defective products. - Which type of costing method focuses on identifying and managing costs at the activity level?
A. Standard costing.
B. Job order costing.
C. Activity-based costing (ABC).
D. Absorption costing. - Which of the following is an example of a facility-level cost under activity-based costing (ABC)?
A. Machine setup costs.
B. Advertising costs.
C. Inspection costs.
D. Direct labor costs. - Which of the following best defines the role of activity-based management (ABM)?
A. To minimize labor costs across all departments.
B. To align resources with customer needs through more efficient management of activities.
C. To focus exclusively on direct production costs.
D. To increase sales through advertising. - A company applies activity-based costing (ABC) and determines the total cost of a product. The next step in ABC is to:
A. Set the price of the product based on the total cost.
B. Allocate overhead to the product using a predetermined rate.
C. Identify cost drivers and assign costs to products based on their consumption of activities.
D. Calculate the company’s net income. - What is a key benefit of using activity-based costing (ABC) over traditional costing methods?
A. It reduces the number of cost drivers used.
B. It leads to simpler financial statements.
C. It provides more accurate cost information by linking overhead to specific activities.
D. It eliminates the need for fixed cost allocation. - In the context of quality costs, which of the following is classified as an internal failure cost?
A. Costs of rework and scrap within the company.
B. Customer complaints due to defective products.
C. Warranty claims after product sale.
D. Marketing and advertising expenses. - Which of the following would typically be included in a company’s strategic cost management system?
A. Daily inventory tracking.
B. Reducing overall waste while ensuring the long-term sustainability of the company’s strategy.
C. Managing short-term operational costs to meet budget targets.
D. Focusing exclusively on minimizing fixed costs. - A key characteristic of the activity-based costing (ABC) method is that it:
A. Uses a single cost driver to allocate all costs.
B. Assigns overhead costs based on the activities that drive those costs.
C. Focuses only on variable costs.
D. Relies on financial accounting for cost allocation. - Which of the following is a common challenge faced by companies when implementing activity-based costing (ABC)?
A. It is too simple to implement.
B. It requires minimal data collection.
C. It can be time-consuming and costly to track and assign costs to activities.
D. It eliminates the need for cost drivers. - In target costing, the “market-driven price” is defined as:
A. The price the company expects to receive for a product in the market.
B. The maximum price the company can charge customers.
C. The lowest price at which a product can be sold.
D. The price calculated based on the company’s cost of production. - What does the concept of “capacity cost” refer to in managerial accounting?
A. The cost incurred to manage employee salaries.
B. The cost associated with producing goods up to the company’s maximum capacity.
C. The cost of raw materials used in production.
D. The cost of excess capacity when production levels are below the maximum. - Activity-based management (ABM) helps companies:
A. Ignore customer-related costs.
B. Focus only on reducing direct production costs.
C. Identify areas for cost reduction and efficiency improvement based on activities.
D. Rely on financial accounting principles for decision-making. - When using activity-based costing (ABC), the cost of quality management is divided into which two categories?
A. External failure and internal failure costs.
B. Prevention and appraisal costs.
C. Direct costs and indirect costs.
D. Fixed costs and variable costs. - Which of the following is a potential drawback of using target costing?
A. It is too easy to implement in small companies.
B. It may reduce product quality in order to meet cost targets.
C. It provides limited information for pricing decisions.
D. It is only applicable to service industries. - In the context of activity-based costing (ABC), which of the following would typically be an activity driver?
A. The number of machine hours used.
B. The direct material costs of a product.
C. The total number of units produced.
D. The cost of administrative salaries. - Which of the following is an example of a value-added activity?
A. The cost of reworking defective products.
B. The time spent inspecting products for quality.
C. The production of a component that is directly used in the final product.
D. The cost of shipping finished goods to customers. - Activity-based costing (ABC) assigns indirect costs to:
A. Only production-related activities.
B. Only direct labor and materials.
C. The activities that drive overhead costs, rather than just using a broad allocation method.
D. The department where the costs are incurred. - Which of the following would be considered a non-value-added cost in the context of lean accounting?
A. Direct labor used in production.
B. Machine setup costs.
C. Inspection costs.
D. Direct materials used in manufacturing. - What is the main goal of using a balanced scorecard in managerial accounting?
A. To eliminate unnecessary fixed costs.
B. To measure financial performance only.
C. To provide a comprehensive view of an organization’s performance by evaluating financial and non-financial aspects.
D. To focus on production efficiency and capacity utilization. - Which of the following best describes an emerging trend in managerial accounting regarding sustainability?
A. Emphasizing cost reductions without considering environmental impacts.
B. Integrating environmental, social, and governance (ESG) factors into cost management and performance evaluation.
C. Focusing solely on improving financial performance.
D. Limiting financial reporting to traditional accounting methods only. - In managerial accounting, which of the following is a characteristic of variable costs?
A. They do not change with production levels.
B. They vary in direct proportion to changes in production volume.
C. They are fixed regardless of the production volume.
D. They are primarily associated with fixed assets. - Which of the following is true regarding the use of activity-based costing (ABC) for service industries?
A. ABC can only be applied to manufacturing industries.
B. ABC is not suitable for service industries because they have low overhead costs.
C. ABC can be used to allocate overhead costs more accurately in service industries.
D. ABC ignores cost drivers in service industries. - Which of the following factors should be considered when implementing a cost reduction strategy?
A. Quality should be ignored to achieve cost savings.
B. Short-term savings should be prioritized over long-term sustainability.
C. Costs should be reduced without compromising the company’s strategic goals or customer satisfaction.
D. Employee wages should be reduced to reduce fixed costs. - The primary objective of the Just-in-Time (JIT) inventory management system is to:
A. Increase inventory levels to ensure product availability.
B. Reduce the need for labor in the production process.
C. Minimize inventory and produce products only when they are needed.
D. Maximize production volume. - Which of the following is an example of a non-financial measure that may be included in a balanced scorecard?
A. Net income.
B. Return on investment (ROI).
C. Customer satisfaction levels.
D. Stock price. - What is the purpose of using the cost of quality (COQ) concept in managerial accounting?
A. To ensure that a company reports all of its costs.
B. To analyze and manage the costs incurred due to poor quality and inefficiencies.
C. To set the pricing of a product.
D. To allocate indirect costs in production.
- Which of the following is an example of a variable cost in a manufacturing environment?
A. Rent for factory space.
B. Salary of a production manager.
C. Direct materials used in production.
D. Depreciation on machinery. - In the context of activity-based costing (ABC), what is an “activity driver”?
A. A variable that measures the cost of an activity.
B. A factor that causes costs to be incurred in the first place.
C. A product cost that is difficult to allocate.
D. The revenue generated from each activity. - Which of the following is a key characteristic of activity-based management (ABM)?
A. It eliminates the need for cost allocation.
B. It identifies the activities that drive costs and seeks to improve them.
C. It only focuses on financial outcomes and ignores non-financial performance measures.
D. It focuses primarily on maximizing production output. - What is the purpose of using target costing in a competitive market?
A. To set a price based on production costs and desired profit.
B. To minimize fixed costs in the production process.
C. To determine the maximum cost a product can incur while maintaining a competitive price.
D. To reduce the cost of raw materials. - Under activity-based costing (ABC), which of the following would most likely be an indirect cost?
A. Direct labor.
B. Direct materials.
C. Machine maintenance costs.
D. Production supervisor wages. - Which of the following is an advantage of using activity-based costing (ABC)?
A. It simplifies the allocation of overhead costs to products.
B. It focuses on maximizing profitability at the expense of quality.
C. It provides more accurate product costing by assigning overhead costs based on activities.
D. It only applies to large manufacturing firms. - Which of the following best describes the role of strategic management accounting?
A. It focuses exclusively on historical cost analysis.
B. It involves monitoring and analyzing internal processes to ensure long-term alignment with corporate strategy.
C. It is limited to financial data analysis for operational control.
D. It disregards non-financial information in decision-making. - In a manufacturing company, which of the following would be considered a facility-level cost in the context of activity-based costing (ABC)?
A. Machine setup costs.
B. Electricity used for production.
C. Depreciation on the factory building.
D. Costs of inspecting products. - What is the primary difference between traditional costing and activity-based costing (ABC)?
A. ABC uses a single cost driver to allocate overhead costs.
B. ABC allocates overhead costs more accurately by focusing on activities rather than volume.
C. Traditional costing ignores fixed costs.
D. Traditional costing is more complex than ABC. - Which of the following is considered a prevention cost under the cost of quality framework?
A. Costs of scrap material.
B. Inspection and testing costs.
C. Employee training on quality standards.
D. Warranty costs. - Activity-based management (ABM) helps companies:
A. Reduce all costs without focusing on any specific area.
B. Optimize resource use by focusing on value-added activities.
C. Allocate costs to products based solely on direct labor hours.
D. Focus only on managing direct costs. - Which of the following is a disadvantage of using target costing?
A. It may reduce product quality in order to meet cost targets.
B. It requires little involvement from employees in cost management.
C. It ignores competitive pressures in the market.
D. It leads to higher overall manufacturing costs. - In the context of strategy-based management accounting, which of the following is a key tool for measuring performance?
A. Activity-based costing (ABC).
B. Job order costing.
C. Balanced scorecard.
D. Break-even analysis. - What is the purpose of using a flexible budget in managerial accounting?
A. To adjust budgeted costs based on the actual production levels.
B. To allocate fixed costs evenly across all products.
C. To track only variable costs in the production process.
D. To predict future sales growth. - Which of the following describes a non-value-added activity in a manufacturing setting?
A. Assembling products.
B. Inspecting products for quality control.
C. Packaging products for delivery.
D. Storing raw materials in inventory. - What is the main focus of the just-in-time (JIT) inventory system?
A. To minimize inventory and produce goods only when they are needed in the production process.
B. To increase inventory levels to ensure products are always available.
C. To forecast inventory needs several months in advance.
D. To reduce labor costs by minimizing the workforce. - Which of the following is a common limitation of using the break-even point analysis for decision-making?
A. It assumes that all costs are fixed.
B. It does not account for changes in sales price and volume.
C. It ignores fixed costs.
D. It assumes a constant contribution margin. - In a balanced scorecard, which of the following perspectives focuses on internal processes and efficiency?
A. Financial perspective.
B. Customer perspective.
C. Learning and growth perspective.
D. Internal business processes perspective. - Which of the following is an example of an external failure cost in the cost of quality framework?
A. Rework costs.
B. Product inspection costs.
C. Warranty claims.
D. Employee training expenses. - When implementing activity-based costing (ABC), what is the first step in assigning costs?
A. Identify the cost drivers for each activity.
B. Allocate overhead costs based on volume of production.
C. Set up activity rates based on historical data.
D. Assign direct costs to products. - Which of the following is a major challenge when implementing activity-based management (ABM)?
A. Identifying cost drivers for activities.
B. Eliminating all fixed costs.
C. Ensuring that only financial data is used for decision-making.
D. Reducing all operating costs to zero. - Which of the following is a limitation of activity-based costing (ABC)?
A. It ignores overhead costs.
B. It may be complex and time-consuming to implement in large organizations.
C. It is only applicable to manufacturing industries.
D. It eliminates the need for cost allocation. - Which of the following is a key feature of lean accounting?
A. Focusing only on reducing direct labor costs.
B. Emphasizing efficiency and eliminating waste in accounting processes.
C. Using financial data exclusively for decision-making.
D. Increasing inventory levels to ensure product availability. - Under the balanced scorecard framework, the financial perspective is most concerned with:
A. Employee satisfaction and retention.
B. Customer satisfaction and retention.
C. The company’s financial performance, including profitability and revenue growth.
D. Internal operational efficiencies. - In target costing, the target cost is determined by:
A. Calculating the cost of production first and then adjusting the price accordingly.
B. Subtracting the desired profit from the market-driven price.
C. Adding a fixed profit margin to the production cost.
D. Using the historical cost of production as the target cost. - Which of the following is the primary focus of strategic cost management?
A. Reducing fixed costs.
B. Identifying and eliminating non-value-added activities.
C. Improving product quality without considering costs.
D. Minimizing overhead costs regardless of customer impact. - What is a key advantage of using the flexible budget over a static budget?
A. It helps to better control costs by adjusting for changes in production levels.
B. It only focuses on fixed costs.
C. It ignores variable costs.
D. It simplifies cost allocation for large companies. - Activity-based costing (ABC) is most useful for companies that:
A. Have a large number of different products or services.
B. Have only a few products with consistent production volumes.
C. Focus only on reducing fixed costs.
D. Do not have significant overhead costs. - Which of the following would likely be an example of a cost-driver in a company using activity-based costing (ABC)?
A. Number of employees in the company.
B. Number of machine hours used in production.
C. Total revenue generated.
D. Percentage of fixed costs. - What is a critical component of the Just-in-Time (JIT) system?
A. Reducing raw materials inventory and producing goods only when needed.
B. Increasing inventory levels to prevent stockouts.
C. Hiring additional workers during periods of high demand.
D. Using complex forecasting methods to predict future sales.
- Which of the following best describes an organization’s strategic management accounting system?
A. It focuses only on cost cutting.
B. It helps align accounting decisions with the company’s strategic goals.
C. It simplifies cost allocation across all departments.
D. It exclusively measures financial performance. - Which of the following is NOT a benefit of activity-based costing (ABC)?
A. More accurate product costing.
B. Better allocation of overhead costs.
C. Simpler cost allocation process.
D. Identifies non-value-added activities. - In target costing, which of the following is considered to be the target cost?
A. The cost that is calculated after the product price is determined.
B. The cost that will allow the product to be competitive in the market while providing the desired profit.
C. The cost that includes only direct materials and direct labor.
D. The historical cost of producing a similar product. - Which of the following is a key focus of strategic cost management?
A. Improving product quality without increasing costs.
B. Identifying ways to minimize variable costs without affecting production.
C. Identifying and eliminating non-value-added activities to improve efficiency.
D. Maximizing the volume of sales at any cost. - Under activity-based costing (ABC), which of the following is considered a unit-level activity?
A. Machine setup.
B. Product design.
C. Direct materials used.
D. Facility maintenance. - In the balanced scorecard, which of the following is a measure that focuses on customer satisfaction?
A. Return on investment (ROI).
B. Customer retention rate.
C. The number of units produced.
D. Percentage of overhead costs reduced. - The primary goal of activity-based management (ABM) is to:
A. Improve profit margins by reducing overhead costs.
B. Identify and eliminate activities that do not add value.
C. Lower the direct labor costs per unit.
D. Streamline the budgeting process. - In the context of activity-based costing, what does a “cost driver” represent?
A. The factor that causes costs to be incurred.
B. A fixed cost that does not change with production volume.
C. The revenue generated from a specific activity.
D. A measure of efficiency in production. - What is the main limitation of activity-based costing (ABC)?
A. It is simple to implement.
B. It can be time-consuming and expensive to implement.
C. It is only applicable in manufacturing environments.
D. It focuses exclusively on direct costs. - Which of the following is a key difference between activity-based costing (ABC) and traditional costing?
A. ABC uses more detailed cost drivers for assigning overhead costs.
B. ABC allocates overhead costs using a single cost driver.
C. Traditional costing allocates costs based on machine hours.
D. ABC ignores fixed costs in cost allocation. - Which of the following is a major advantage of using a flexible budget in a manufacturing environment?
A. It helps adjust for changes in production volume and cost behavior.
B. It simplifies the budgeting process by assuming fixed costs.
C. It eliminates the need for detailed financial analysis.
D. It focuses exclusively on sales revenues. - Which of the following would be considered an internal failure cost under the cost of quality framework?
A. Warranty claims.
B. Cost of rework or scrap.
C. Lost sales due to defective products.
D. Customer complaints. - What is the primary objective of the balanced scorecard framework?
A. To measure only financial outcomes and ignore non-financial data.
B. To align company activities with strategic goals using financial and non-financial measures.
C. To increase profitability by focusing exclusively on financial measures.
D. To reduce overhead costs across the organization. - Which of the following is a feature of lean accounting?
A. It eliminates all indirect costs from cost allocation.
B. It emphasizes cost-cutting and inventory reduction.
C. It focuses on reducing the number of cost centers.
D. It uses more complex budgeting methods to reduce costs. - Which of the following is true about a company that uses activity-based costing (ABC)?
A. It will assign all overhead costs to a single cost pool.
B. It may use multiple cost drivers to allocate overhead to products.
C. It ignores the relationship between overhead and production activity.
D. It does not allocate indirect costs to products. - The principle of “continuous improvement” in managerial accounting is most closely related to:
A. Increasing fixed costs to reduce variable costs.
B. Ensuring that the product price always exceeds direct material costs.
C. Minimizing waste and inefficiencies while maintaining product quality.
D. Reducing profits to maximize market share. - Which of the following is an example of an external failure cost in the cost of quality framework?
A. Rework costs.
B. Inspection and testing costs.
C. Product warranty costs.
D. Employee training expenses. - Which of the following is true about the relationship between cost and activity in activity-based costing (ABC)?
A. All costs are treated as fixed regardless of the activity.
B. Costs are directly tied to the activities that consume resources.
C. Costs are evenly distributed across all products.
D. Activity drivers are not used to allocate costs. - What is the main goal of target costing?
A. To determine the maximum price a company can charge for a product.
B. To set the desired profit margin based on market conditions and cost constraints.
C. To establish the market price for a product and then adjust the cost to meet it.
D. To allocate fixed costs to each unit of production. - In a competitive market, a company using target costing seeks to:
A. Maximize its cost structure.
B. Minimize production costs while maintaining product quality.
C. Ensure that production costs are higher than competitors’ costs.
D. Set higher prices to increase profits. - Which of the following would be classified as a facility-level cost in activity-based costing (ABC)?
A. Machine setup costs.
B. Depreciation on production machinery.
C. Direct materials used.
D. Product inspection costs. - Which of the following is the primary advantage of using a flexible budget over a static budget?
A. It adjusts for changes in production volume and cost behavior.
B. It focuses only on fixed costs.
C. It simplifies the budgeting process by assuming constant conditions.
D. It eliminates the need for variance analysis. - Under activity-based costing (ABC), what type of activity driver would be used to allocate the costs of machine maintenance?
A. Number of machine hours used.
B. Number of units produced.
C. Number of products sold.
D. Direct labor hours. - Which of the following is a characteristic of the lean manufacturing approach?
A. It emphasizes reducing waste and increasing efficiency.
B. It focuses on increasing the number of units produced without regard to quality.
C. It minimizes the use of technology in the production process.
D. It advocates for increasing inventory levels to ensure product availability. - Which of the following is a limitation of activity-based management (ABM)?
A. It can be time-consuming and costly to implement.
B. It eliminates the need for cost allocation.
C. It disregards cost drivers in the decision-making process.
D. It focuses solely on reducing labor costs. - The concept of “capacity cost” refers to:
A. The cost of raw materials used in production.
B. The cost of unused production capacity that is not being utilized.
C. The cost of direct labor and direct materials.
D. The cost of marketing and sales activities. - In the balanced scorecard framework, the learning and growth perspective focuses on:
A. Financial performance and profitability.
B. Customer satisfaction and loyalty.
C. Enhancing employee skills and organizational knowledge.
D. Internal business processes and efficiency. - What is the main goal of cost-volume-profit (CVP) analysis?
A. To calculate the optimal level of sales.
B. To identify the contribution margin per product.
C. To determine the break-even point and the impact of variable costs.
D. To allocate fixed costs across multiple departments. - Which of the following is a limitation of target costing?
A. It can lead to quality issues due to cost-cutting measures.
B. It is only applicable to service industries.
C. It eliminates the need for financial analysis.
D. It discourages product innovation. - In activity-based costing (ABC), which of the following is NOT an activity-based allocation base?
A. Direct labor hours.
B. Machine hours.
C. Number of product inspections.
D. Number of customer orders.
- In the context of activity-based costing, which of the following is an example of a resource-level activity?
A. Equipment maintenance.
B. Direct labor.
C. Supervisory wages.
D. Machine setup. - Which of the following is true about quality cost categories?
A. Internal failure costs include costs related to rework and scrap.
B. External failure costs only apply to warranty claims.
C. Prevention costs include costs for quality audits.
D. Appraisal costs are fixed and do not vary with production volume. - Which of the following describes the purpose of activity-based management (ABM)?
A. To control only direct costs associated with production.
B. To reduce overhead costs by eliminating activities.
C. To allocate costs to departments based on production volume.
D. To track financial performance and profitability. - Which of the following is the primary focus of lean accounting?
A. Maximizing overhead expenses to increase productivity.
B. Identifying wasteful activities and reducing non-value-added costs.
C. Focusing solely on increasing sales to boost profitability.
D. Allocating fixed costs to products based on labor hours. - Which of the following is a characteristic of the balanced scorecard’s financial perspective?
A. It focuses on improving employee skills and development.
B. It emphasizes the importance of customer satisfaction.
C. It aligns with the organization’s strategic goals to achieve financial success.
D. It measures internal business process efficiencies. - Which of the following is a method for managing and reducing waste in a lean production environment?
A. Just-in-time inventory management.
B. Increased production schedules.
C. Reducing quality control measures.
D. Expanding product variety. - Under the target costing method, which of the following is true about the target cost?
A. It is calculated after the product price has been set.
B. It is the cost that must be achieved to allow a desired profit margin.
C. It is the historical cost of manufacturing a product.
D. It is an arbitrary cost set by management. - What is the main purpose of flexible budgeting in managerial accounting?
A. To account for fixed costs that are unaffected by production levels.
B. To allow for adjustments to budgeted revenues and costs based on actual activity.
C. To simplify the budgeting process by ignoring changes in sales volume.
D. To estimate future sales prices for all products. - Which of the following is a key feature of activity-based costing (ABC)?
A. Costs are allocated to products based on a single cost driver.
B. It ignores the complexity of overhead allocation.
C. It assigns overhead costs based on activities that consume resources.
D. It uses direct labor hours as the sole cost driver. - Which of the following is considered an external failure cost in the cost of quality framework?
A. Cost of training employees.
B. Warranty claims.
C. Rework costs.
D. Inspection costs. - In the balanced scorecard, the internal business processes perspective focuses on:
A. Maximizing shareholder value.
B. Enhancing operational efficiency and quality.
C. Improving customer satisfaction.
D. Monitoring the financial health of the company. - Which of the following is an example of a unit-level activity in activity-based costing (ABC)?
A. Setting up machines for production.
B. Inspecting products for quality.
C. Direct materials used in production.
D. Providing customer service. - In which of the following scenarios would activity-based costing (ABC) be particularly beneficial?
A. A company has a single product and low overhead costs.
B. A company produces a variety of products with complex overhead costs.
C. A company has no direct labor costs.
D. A company does not have overhead costs. - Which of the following is a key factor in successful implementation of activity-based costing (ABC)?
A. Ignoring indirect costs when assigning overhead.
B. Identifying cost drivers that accurately reflect resource consumption.
C. Using a single cost driver for all cost pools.
D. Minimizing the involvement of employees in the process. - Which of the following is true about cost behavior in flexible budgeting?
A. Variable costs remain constant regardless of production levels.
B. Fixed costs increase as production volume increases.
C. Variable costs change in direct proportion to production activity.
D. Both fixed and variable costs change with production volume. - What is the primary purpose of strategy management accounting in a company?
A. To align financial decisions with long-term strategic goals.
B. To focus only on cost reduction.
C. To calculate the company’s overall profitability.
D. To ensure that accounting practices comply with financial regulations. - What is the major goal of cost-volume-profit (CVP) analysis?
A. To determine the price of a product.
B. To understand how changes in costs and volume affect a company’s profit.
C. To allocate fixed costs between products.
D. To calculate a company’s break-even point based on fixed costs. - Which of the following is a limitation of activity-based costing (ABC)?
A. It is always more accurate than traditional costing methods.
B. It is only applicable to large companies with complex production processes.
C. It is more costly and time-consuming to implement compared to traditional costing.
D. It requires fewer data points for accurate allocation of costs. - Which of the following is a typical cost driver in activity-based costing (ABC)?
A. Direct labor hours.
B. Sales revenue.
C. Units of output.
D. Number of customer complaints. - In which of the following scenarios would target costing be used?
A. Setting a price for a new product and adjusting costs to meet the target profit margin.
B. Allocating overhead costs to products based on direct labor hours.
C. Estimating the long-term profitability of a product.
D. Determining the cost of direct materials for a new product. - In the context of a balanced scorecard, the customer perspective focuses on:
A. Maximizing shareholder value.
B. Achieving operational efficiency.
C. Understanding customer needs and enhancing customer satisfaction.
D. Managing financial performance through cost cutting. - Which of the following is an example of a non-financial performance measure in the balanced scorecard?
A. Return on investment (ROI).
B. Net income.
C. Employee training hours.
D. Earnings per share (EPS). - What is the purpose of capacity management in advanced managerial accounting?
A. To calculate the fixed costs for a production line.
B. To ensure that production capacity is used efficiently and cost-effectively.
C. To measure the quality of the products produced.
D. To increase the number of production shifts. - Which of the following is an example of a fixed cost in a production environment?
A. Direct materials.
B. Direct labor.
C. Rent for factory space.
D. Sales commissions. - In target costing, what is the first step in the cost reduction process?
A. Setting the target cost based on the desired profit margin.
B. Analyzing production costs to identify inefficiencies.
C. Setting the price of the product.
D. Calculating the actual cost of production. - In activity-based management (ABM), which of the following is most likely to be the result of eliminating non-value-added activities?
A. Increased production costs.
B. Increased efficiency and reduced overhead costs.
C. Increased product prices.
D. Lower customer satisfaction. - Which of the following is true about the cost of quality framework?
A. Prevention costs are always higher than internal failure costs.
B. Internal failure costs occur when defects are detected before reaching the customer.
C. Appraisal costs include customer service and warranty claims.
D. External failure costs are always the responsibility of the supplier. - Which of the following is a potential disadvantage of using activity-based costing (ABC)?
A. It simplifies cost allocation across departments.
B. It may lead to more complex cost structures and reporting.
C. It ignores cost drivers for fixed costs.
D. It cannot be used for service industries. - Which of the following statements about strategy and management accounting is true?
A. Strategy and management accounting are completely independent of each other.
B. Strategy is concerned only with long-term planning, while management accounting deals with day-to-day operations.
C. Management accounting provides the financial data necessary to implement strategic decisions.
D. Strategy is unrelated to the company’s performance measures. - Which of the following is true regarding capacity in managerial accounting?
A. Capacity is only related to labor costs.
B. Capacity refers to the ability to produce goods at the required speed and quality.
C. Fixed costs do not affect the calculation of capacity.
D. The cost of unused capacity is never considered in cost management.
- In activity-based costing (ABC), which of the following would most likely be an example of an activity-level cost driver?
A. The number of products sold.
B. The number of machine setups.
C. The number of direct labor hours.
D. The amount of raw materials used. - What does the term “capacity utilization” refer to in a managerial accounting context?
A. The level of demand for products.
B. The ratio of actual production to potential production capacity.
C. The cost of maintaining production facilities.
D. The amount of raw materials used in production. - Which of the following is an example of a preventive cost in the cost of quality framework?
A. Costs of rework and repairs.
B. Costs of product testing and inspections.
C. Costs of product design and process improvements.
D. Warranty claims. - Which of the following is the correct definition of target costing?
A. Setting a target cost to achieve the desired profit margin based on a competitive market price.
B. Calculating the cost of a product based on historical cost data.
C. Allocating fixed costs based on the number of units produced.
D. Estimating future costs and revenues for long-term decision-making. - In the context of strategic management accounting, which of the following is most likely to be used for measuring competitive advantage?
A. Profitability ratios.
B. Market share analysis.
C. Return on assets.
D. Customer satisfaction metrics. - Which of the following is a characteristic of a flexible budget?
A. It is prepared at the start of the period and remains unchanged.
B. It adjusts to reflect changes in activity levels.
C. It is based on historical data and averages.
D. It only includes fixed costs. - What is the primary focus of the balanced scorecard’s internal business process perspective?
A. Achieving financial growth.
B. Enhancing operational efficiencies and customer value.
C. Improving employee satisfaction and development.
D. Increasing shareholder wealth. - Which of the following is an example of a batch-level activity in activity-based costing (ABC)?
A. Setting up equipment for production runs.
B. Direct labor hours.
C. Inspections conducted on a per-unit basis.
D. Electricity consumed by machines during production. - Which of the following describes the concept of “waste” in lean accounting?
A. Activities that add value to the product.
B. Any cost that cannot be reduced without affecting product quality.
C. Any activity that does not add value to the customer.
D. Only activities that increase production costs. - Which of the following is true regarding the relationship between costs and pricing in target costing?
A. The cost is set first, followed by pricing decisions.
B. The price is set first, and the cost must be reduced to meet the target profit margin.
C. The price is set after determining the actual cost of production.
D. Target costing assumes that price changes are not necessary to meet profit goals. - What does activity-based management (ABM) focus on improving?
A. The allocation of direct labor costs.
B. The financial reporting of product costs.
C. The efficiency and effectiveness of activities within an organization.
D. The accuracy of product pricing. - Which of the following is a limitation of activity-based costing (ABC)?
A. It can be too complex and costly for companies with a low level of overhead.
B. It requires no data entry from employees or managers.
C. It ignores the effects of fixed costs on products.
D. It eliminates the need for cost drivers altogether. - Which of the following is an example of an external failure cost in the cost of quality framework?
A. Repairing defective products.
B. Costs related to product redesign.
C. Warranty claims and customer returns.
D. Employee training costs. - Which of the following would most likely be included in an emerging accounting issue for management?
A. Adoption of new tax laws.
B. Changes in accounting standards related to revenue recognition.
C. Shifting production schedules.
D. Adjustment of employee compensation packages. - In the context of activity-based costing (ABC), what is a cost pool?
A. A single cost driver used to allocate indirect costs.
B. A group of costs related to a specific activity or set of activities.
C. A measure of output used to allocate fixed costs.
D. A method of calculating overhead rates for direct labor. - Which of the following best describes “activity-level costs” in activity-based costing (ABC)?
A. Costs that are incurred each time a product is produced.
B. Costs that are incurred to support an entire department.
C. Costs that are associated with specific activities, not individual products.
D. Costs that are incurred for each unit of output produced. - In the context of target costing, which of the following is the key to achieving cost reductions?
A. Increasing product prices in response to customer demand.
B. Identifying and eliminating non-value-added activities.
C. Adding additional features to products to justify higher prices.
D. Increasing fixed costs to improve product quality. - What is a key challenge of implementing activity-based costing (ABC) in a company?
A. Identifying and defining cost drivers for each activity.
B. Determining the total cost of all products.
C. Allocating costs based solely on direct labor.
D. Simplifying the company’s cost structure. - Which of the following describes a situation where a company would use a flexible budget?
A. To evaluate the performance of management against a set budget.
B. To allocate overhead costs based on machine hours.
C. To assess the effect of varying production volumes on cost and profit.
D. To forecast long-term costs based on market trends. - Which of the following is a characteristic of a traditional costing system, as compared to activity-based costing?
A. It assigns overhead costs based on activities and cost drivers.
B. It allocates overhead costs based on a broad average.
C. It uses multiple cost pools to allocate overhead.
D. It provides more accurate product costing for complex production environments. - What is the primary benefit of using activity-based management (ABM)?
A. It ensures that all activities in the production process are fully allocated.
B. It helps identify and eliminate inefficient or non-value-added activities.
C. It simplifies the accounting process by reducing the need for detailed cost tracking.
D. It minimizes the need for employee involvement in the decision-making process. - Which of the following is a common cost driver in activity-based costing (ABC)?
A. Machine hours.
B. Units produced.
C. Number of employees.
D. Amount of fixed costs incurred. - Which of the following best describes the relationship between the fixed and variable costs in a flexible budget?
A. Fixed costs do not change with changes in activity levels, while variable costs do.
B. Variable costs remain constant, while fixed costs fluctuate with activity levels.
C. Both fixed and variable costs change with changes in activity levels.
D. Both fixed and variable costs remain constant with changes in activity levels. - Which of the following is the focus of lean accounting?
A. Reducing waste and enhancing value creation by eliminating non-value-added activities.
B. Focusing on cost minimization in all activities, regardless of value.
C. Expanding product offerings to increase revenue.
D. Centralizing all accounting functions in one department. - In the context of cost of quality, what is an internal failure cost?
A. The cost of warranty claims.
B. The cost of scrap or rework that occurs before a product reaches the customer.
C. The cost of advertising to increase customer demand.
D. The cost of customer service provided after the sale. - How does the balanced scorecard enhance strategic management?
A. By providing a single financial measure to assess company performance.
B. By integrating both financial and non-financial performance measures to align business activities with strategic goals.
C. By focusing solely on financial outcomes rather than employee engagement.
D. By emphasizing cost control without regard to customer satisfaction. - What does activity-based costing (ABC) help companies do?
A. Eliminate all fixed costs.
B. Allocate overhead costs based on the number of direct labor hours worked.
C. Identify more accurate cost drivers and assign costs based on actual resource consumption.
D. Simplify the allocation of overhead by using a single cost driver.
- Which of the following is a characteristic of a company’s capacity costs in relation to activity-based costing (ABC)?
A. They are easily allocated to individual products.
B. They remain the same regardless of production levels.
C. They fluctuate with product demand.
D. They are only variable costs. - Which of the following statements is true regarding the application of activity-based costing (ABC)?
A. ABC can only be used in manufacturing settings.
B. ABC focuses on broad cost pools instead of activity-based cost drivers.
C. ABC improves cost accuracy by allocating overhead to specific activities.
D. ABC only applies to direct costs. - What is the focus of quality management costs in managerial accounting?
A. Reducing labor costs by eliminating inspection activities.
B. Reducing the time spent on the production process.
C. Measuring and managing the costs associated with ensuring product quality.
D. Increasing fixed costs to improve product efficiency. - In activity-based costing (ABC), which of the following is classified as a unit-level activity?
A. Machine setups.
B. Product design costs.
C. Direct labor costs.
D. Depreciation on equipment. - What is one of the main objectives of activity-based management (ABM)?
A. To determine the best possible pricing for products.
B. To focus on the most profitable customers.
C. To increase labor costs to meet demand.
D. To improve the efficiency of activities and reduce non-value-added costs. - What is the primary purpose of a flexible budget?
A. To compare actual performance against a static budget.
B. To assess performance based on a single level of activity.
C. To adjust the budget for varying levels of activity.
D. To create long-term forecasts for the next fiscal year. - Which of the following is the correct definition of target costing?
A. Setting the selling price and subtracting the desired profit margin to determine allowable costs.
B. Setting a target cost that must be met after the price and expected profit are determined.
C. Allocating costs based on historical profit margins.
D. Estimating total costs using the cost-plus pricing method. - In activity-based costing (ABC), which of the following is classified as a batch-level cost?
A. The cost of packaging for each individual unit.
B. The cost of setting up machinery for a new production batch.
C. The cost of inspecting finished units.
D. The cost of materials used in production. - What type of costs are most closely associated with the concept of “quality costs” in managerial accounting?
A. Transaction costs.
B. Environmental costs.
C. Product development costs.
D. Prevention, appraisal, internal failure, and external failure costs. - Which of the following is true about cost allocation in activity-based costing (ABC)?
A. ABC allocates all costs equally across all products.
B. ABC assigns direct labor and direct materials to each product.
C. ABC assigns both direct and indirect costs based on activities that consume resources.
D. ABC ignores the impact of fixed costs on product costing. - Which of the following is considered a non-financial measure in a balanced scorecard?
A. Return on investment.
B. Customer satisfaction.
C. Profit margin.
D. Earnings per share. - What is the main objective of a target costing system?
A. To minimize production costs at all levels of output.
B. To set the price of a product based on competition and market demand.
C. To determine the maximum allowable cost based on the competitive price and desired profit.
D. To maximize profits by reducing taxes. - What does the “internal business process” perspective in the balanced scorecard emphasize?
A. Customer relationships.
B. Operational efficiency and process improvements.
C. Financial performance indicators.
D. Employee engagement and satisfaction. - How does activity-based management (ABM) help improve organizational performance?
A. By reducing overhead costs for all departments equally.
B. By focusing on reducing non-value-added activities and improving processes.
C. By increasing the prices of low-profit products.
D. By reducing fixed costs for departments with low productivity. - Which of the following would be classified as an “emerging accounting issue”?
A. Adoption of new tax codes for individuals.
B. Changes in accounting standards regarding revenue recognition.
C. Shifting product demand patterns in the market.
D. Adjusting for inflation in long-term contracts. - In the context of target costing, what is the primary role of the product design team?
A. To create an initial cost estimate for the product.
B. To make changes to the design in response to cost overruns.
C. To identify cost reduction opportunities in the design phase.
D. To calculate product pricing based on market trends. - In activity-based costing (ABC), which of the following would be classified as a product-level cost?
A. The cost of machine setups.
B. The cost of inspecting finished goods.
C. The cost of product design.
D. The cost of advertising specific products. - Which of the following is an advantage of using a flexible budget over a static budget?
A. It accounts for changes in production volume, making it more accurate.
B. It is easier to prepare and requires fewer data inputs.
C. It provides a fixed cost allocation for the entire period.
D. It ignores fluctuations in the market conditions. - What is the primary benefit of using activity-based costing (ABC) in an organization?
A. It simplifies the allocation of indirect costs.
B. It reduces the need for cost tracking and reporting.
C. It provides a more accurate allocation of overhead costs.
D. It eliminates the need for detailed financial analysis. - What is the relationship between activity-based costing (ABC) and traditional costing methods?
A. ABC assigns costs more broadly, while traditional costing is more precise.
B. ABC assigns costs to activities based on their actual consumption of resources, whereas traditional costing uses a broad allocation base.
C. Both methods are based entirely on direct labor hours.
D. ABC and traditional costing produce identical results. - Which of the following is considered a unit-level activity under activity-based costing (ABC)?
A. Product packaging.
B. Product testing.
C. Equipment maintenance.
D. Machine setup. - What is the focus of the “learning and growth” perspective in the balanced scorecard?
A. Employee development and skills improvement.
B. Operational efficiency.
C. Financial performance and profitability.
D. Customer retention and satisfaction. - What would be classified as an external failure cost in the cost of quality framework?
A. Inspection costs.
B. Warranty claims.
C. Scrap costs.
D. Rework costs. - In activity-based costing (ABC), which of the following would most likely be classified as a facility-level cost?
A. The cost of building maintenance.
B. The cost of raw materials used in production.
C. The cost of machine setup for a new batch of products.
D. The cost of testing each unit produced. - How does lean accounting contribute to the financial success of a business?
A. By increasing inventory levels to reduce the cost of production.
B. By streamlining processes, reducing waste, and improving efficiency.
C. By focusing solely on cost-cutting measures without considering quality.
D. By reducing production speed to ensure product quality. - Which of the following is the focus of the “financial” perspective in the balanced scorecard?
A. Operational processes and efficiencies.
B. Employee training and development.
C. Customer satisfaction and loyalty.
D. Financial performance, such as profit margins and return on investment. - Which of the following is an example of a non-value-added activity in managerial accounting?
A. Direct labor in production.
B. The inspection of finished goods before shipment.
C. The movement of materials between departments.
D. Product design improvements.
- What is the primary objective of activity-based costing (ABC)?
A. To allocate all costs equally to all products.
B. To accurately allocate overhead based on activities that consume resources.
C. To focus on reducing fixed costs in production.
D. To create a fixed overhead rate for all products. - In the context of cost behavior, which of the following would be classified as a fixed cost?
A. Direct labor.
B. Direct materials.
C. Rent for factory space.
D. Sales commissions. - What is the focus of target costing in managerial accounting?
A. To set prices based on the expected profit margin and desired return.
B. To reduce costs during production based on product price and competition.
C. To determine the cost of a product after setting its price.
D. To minimize costs by eliminating fixed costs. - Which of the following is a limitation of activity-based costing (ABC)?
A. It eliminates the need for cost allocation entirely.
B. It requires less detailed data than traditional costing systems.
C. It can be expensive and time-consuming to implement and maintain.
D. It cannot allocate fixed costs accurately. - In activity-based costing, which of the following is most likely to be an activity driver for an order processing cost pool?
A. Machine hours.
B. Number of orders processed.
C. Labor hours.
D. Direct materials used. - In the balanced scorecard, which perspective focuses on how well an organization’s internal processes are running, and whether its products and services conform to customer requirements?
A. Financial perspective.
B. Customer perspective.
C. Internal business process perspective.
D. Learning and growth perspective. - What is the main advantage of using a flexible budget compared to a static budget?
A. It provides a fixed cost allocation for all periods.
B. It adjusts for changes in production levels and activity.
C. It reduces the complexity of financial forecasting.
D. It eliminates the need for variance analysis. - What is the role of an activity driver in activity-based costing?
A. To increase production efficiency.
B. To assign costs to activities based on resource consumption.
C. To track fixed costs across different departments.
D. To estimate future costs based on past activity levels. - What is the primary focus of activity-based management (ABM)?
A. Increasing the volume of products produced.
B. Managing activities to reduce non-value-added costs and improve efficiency.
C. Maximizing profitability through price adjustments.
D. Increasing direct labor costs to improve productivity. - Which of the following is considered a prevention cost in the cost of quality framework?
A. Warranty costs.
B. Training employees to improve quality.
C. Rework costs.
D. Scrap costs. - How does activity-based costing (ABC) improve cost accuracy?
A. By allocating all indirect costs equally across products.
B. By identifying and tracing indirect costs to specific activities that drive the costs.
C. By ignoring the direct costs and focusing only on fixed overhead.
D. By applying a single cost driver for all activities. - What does a balanced scorecard help organizations measure and manage?
A. Financial profitability only.
B. Long-term goals and objectives.
C. Performance across multiple areas, including financial, customer, internal processes, and learning and growth.
D. Short-term gains in profitability. - What is the main objective of measuring quality costs in managerial accounting?
A. To reduce fixed costs associated with production.
B. To monitor the cost of replacing defective goods.
C. To improve product quality while reducing total costs.
D. To evaluate product pricing strategies. - How does activity-based costing (ABC) treat overhead costs differently from traditional costing methods?
A. ABC ignores overhead costs altogether.
B. ABC allocates overhead costs based on the specific activities that drive costs.
C. ABC uses a single allocation base for all overhead costs.
D. ABC assigns overhead costs to direct labor hours only. - What is the purpose of a strategic cost management system?
A. To minimize costs by cutting all expenses.
B. To align the cost structure with the company’s competitive strategy.
C. To increase labor costs to improve productivity.
D. To maximize short-term profitability at the expense of long-term goals. - Which of the following would be classified as an internal failure cost in the cost of quality framework?
A. Costs related to rework.
B. Costs of repairs made after product defects are identified.
C. Warranty repair costs.
D. Lost sales due to poor quality. - Which of the following describes a strategy used in activity-based management (ABM)?
A. Reduce production output to decrease overhead costs.
B. Focus on cutting labor costs to improve profitability.
C. Increase the focus on non-value-added activities to improve quality.
D. Analyze activities to identify and reduce non-value-added activities. - In activity-based costing (ABC), what is the best way to allocate the costs associated with an activity such as machine maintenance?
A. Based on the number of units produced.
B. Based on the number of machine hours used.
C. Based on the number of workers employed.
D. Based on the amount of direct labor incurred. - What is the key objective of lean accounting?
A. To focus on maximizing inventory levels.
B. To eliminate waste and improve efficiency in financial reporting.
C. To reduce the amount of direct labor in production.
D. To increase the volume of production. - What is the definition of an “emerging accounting issue”?
A. An accounting standard that has been around for a long time but is being revised.
B. A new accounting challenge that requires attention due to changes in market conditions or business practices.
C. A minor update to an existing accounting rule.
D. A tax law change that affects accounting practices. - What is the purpose of activity-based costing in a manufacturing company?
A. To reduce direct labor costs.
B. To allocate overhead costs more accurately based on activities that drive costs.
C. To allocate costs equally across all departments.
D. To simplify the allocation of fixed costs. - In activity-based costing, which of the following is most likely to be classified as a product-level activity?
A. Depreciation on equipment used across all products.
B. Design costs related to a specific product.
C. Setup costs for a production run.
D. Direct materials used for each unit produced. - In a balanced scorecard, which of the following perspectives focuses on customer satisfaction and retention?
A. Financial perspective.
B. Customer perspective.
C. Internal business process perspective.
D. Learning and growth perspective. - In target costing, what is the target cost?
A. The maximum cost that can be spent on production to meet a competitive price.
B. The minimum cost required to break even.
C. The cost of producing goods without considering market competition.
D. The total cost incurred in the first production cycle. - Which of the following is the main objective of activity-based management (ABM)?
A. To increase sales through price adjustments.
B. To manage activities to eliminate inefficiencies and non-value-added costs.
C. To increase direct labor costs to improve product quality.
D. To allocate all fixed costs equally across all products. - Which of the following is an example of an external failure cost in the cost of quality framework?
A. Costs associated with inspecting raw materials.
B. Warranty repair costs for a defective product.
C. Costs of training workers on quality standards.
D. Rework costs for products that do not meet quality standards. - What is the key principle behind activity-based costing (ABC)?
A. Allocating costs based solely on labor hours.
B. Allocating costs based on the specific activities that consume resources.
C. Allocating costs equally across all products.
D. Reducing fixed costs to improve profitability. - Which of the following would be an example of a value-added activity?
A. Inspecting products for quality defects.
B. Transporting goods from the warehouse to the store.
C. Assembling parts into finished products.
D. Storing inventory in the warehouse. - What is the main goal of activity-based costing (ABC) in a company that produces multiple products?
A. To allocate overhead based on direct labor hours.
B. To allocate overhead costs to products based on the activities that consume resources.
C. To treat all products the same for cost allocation purposes.
D. To eliminate the need for direct materials cost tracking. - What is the purpose of using a flexible budget?
A. To eliminate variances between actual and budgeted costs.
B. To adjust the budget for changes in activity levels.
C. To set fixed costs for all periods.
D. To simplify cost control by ignoring changes in activity. - In activity-based costing, what is an activity driver?
A. A measure that traces cost to specific activities.
B. The rate at which overhead costs are allocated.
C. The total amount of direct costs incurred.
D. A tool used to eliminate waste in production. - How does activity-based costing improve decision-making?
A. By allocating costs equally across all products.
B. By providing more accurate cost information based on the activities that consume resources.
C. By reducing the need for detailed cost tracking.
D. By focusing only on direct materials costs. - What is the difference between direct costs and indirect costs in activity-based costing?
A. Direct costs are not assigned to products, while indirect costs are.
B. Direct costs are traceable to a product, while indirect costs cannot be directly traced.
C. Direct costs are considered fixed costs, while indirect costs are variable.
D. Direct costs are always higher than indirect costs. - Which of the following best describes a strategic cost management system?
A. A system designed to minimize production costs in the short term.
B. A system that focuses on reducing direct labor costs without considering long-term goals.
C. A system that aligns the company’s cost structure with its overall strategy.
D. A system that eliminates all non-value-added activities. - What is the purpose of cost allocation in activity-based costing?
A. To allocate all fixed costs evenly across all products.
B. To assign costs to activities based on the resources they consume.
C. To reduce total costs by eliminating unnecessary activities.
D. To allocate direct costs based on volume. - How does activity-based costing help companies identify non-value-added activities?
A. By allocating all costs equally across activities.
B. By tracking only fixed costs associated with activities.
C. By focusing on activities that consume resources but do not add value to the product or service.
D. By ignoring activities that do not directly contribute to production. - What is an example of a non-value-added activity in a manufacturing process?
A. Assembling the product.
B. Performing quality inspections.
C. Storing inventory in a warehouse.
D. Developing new product designs. - Which of the following is an example of a prevention cost in the cost of quality framework?
A. Rework costs for defective products.
B. Training employees to ensure quality standards are met.
C. Costs of inspecting products during production.
D. Costs of warranty repairs. - In target costing, which of the following is true about target profit?
A. It is subtracted from the target cost to determine the target price.
B. It is added to the target cost to determine the target price.
C. It is determined after the target cost is set.
D. It is irrelevant to the target costing process. - What is the major challenge when implementing activity-based costing (ABC)?
A. ABC is too costly and time-consuming to implement.
B. ABC requires fewer resources than traditional costing systems.
C. ABC does not provide any benefits for companies with simple cost structures.
D. ABC can only be applied in service-based industries. - How does activity-based management (ABM) help reduce costs?
A. By focusing on maximizing production output.
B. By analyzing and eliminating non-value-added activities.
C. By increasing labor costs to improve efficiency.
D. By cutting all discretionary spending. - What is the difference between absorption costing and variable costing?
A. Absorption costing includes all costs in the cost of goods sold, while variable costing only includes variable production costs.
B. Absorption costing excludes fixed costs, while variable costing includes both fixed and variable costs.
C. Absorption costing includes only direct labor and materials, while variable costing includes all costs.
D. Absorption costing is used for external reporting, while variable costing is used for internal decision-making.
- In the context of activity-based costing (ABC), what is a resource driver?
A. A factor used to allocate overhead costs to activities.
B. A measure of how much an activity consumes resources.
C. A rate used to allocate activity costs to cost objects.
D. A tool to determine the cost of labor. - Which of the following is a characteristic of target costing?
A. It is used to determine the cost of new products after they are developed.
B. It focuses on setting a price and then reducing costs to meet the target.
C. It focuses solely on increasing sales revenue.
D. It ignores competition in the pricing process. - What is the main focus of strategic cost management?
A. Reducing overhead costs to increase profitability.
B. Aligning cost structure with the organization’s overall strategy to achieve competitive advantage.
C. Focusing on short-term cost cutting measures.
D. Increasing revenue while ignoring cost considerations. - In activity-based costing, the costs of activities that do not directly contribute to production are referred to as:
A. Non-value-added costs.
B. Direct costs.
C. Variable costs.
D. Fixed costs. - What does an activity-based costing system help a company to achieve?
A. Simplified financial reporting.
B. A more accurate allocation of overhead costs to products.
C. Uniform allocation of all indirect costs across all products.
D. Elimination of non-manufacturing costs. - Which of the following is the primary advantage of using activity-based costing (ABC) over traditional costing methods?
A. It requires less data to allocate costs.
B. It provides more accurate cost information by focusing on activities.
C. It eliminates the need for cost drivers.
D. It is simpler to implement than traditional costing methods. - What is a cost driver in activity-based costing?
A. A factor that causes changes in the cost of an activity.
B. A factor that determines the price of a product.
C. A factor used to allocate fixed costs to products.
D. A variable that remains unchanged regardless of production levels. - In target costing, what is meant by the term “target price”?
A. The maximum price that a customer is willing to pay for a product.
B. The price at which a company expects to sell the product to achieve the desired profit.
C. The cost of producing a product without any profit margin.
D. The price set by competitors for a similar product. - What is the primary purpose of quality cost reporting?
A. To determine the price at which products should be sold.
B. To track costs associated with ensuring product quality.
C. To allocate costs based on the resources consumed.
D. To improve the organization’s pricing strategy. - In a cost of quality framework, what are appraisal costs?
A. Costs associated with inspecting and testing products to ensure they meet quality standards.
B. Costs incurred due to product defects after the product reaches the customer.
C. Costs of preventing defects before they occur.
D. Costs related to the disposal of defective products. - How does activity-based costing (ABC) improve cost management?
A. By focusing on reducing fixed costs only.
B. By allocating all overhead costs based on volume of production.
C. By identifying the activities that consume resources and assigning costs based on those activities.
D. By simplifying all cost allocation methods. - Which of the following best defines activity-based management (ABM)?
A. A method to allocate costs based on labor hours.
B. A system for managing activities to reduce costs and increase efficiency.
C. A tool for pricing products based on activity costs.
D. A method of financial reporting for activity-based costing systems. - In an activity-based costing system, which of the following is the most appropriate cost driver for machine maintenance activities?
A. Direct labor hours.
B. Number of machine hours used.
C. Number of products produced.
D. Number of workers employed. - What is the key difference between activity-based costing and traditional costing systems?
A. ABC allocates costs based solely on direct labor, while traditional costing allocates overhead on the basis of a single cost driver.
B. ABC assigns overhead costs more accurately based on the activities that drive costs, while traditional costing allocates overhead uniformly across products.
C. ABC assigns all fixed costs to products, while traditional costing assigns only variable costs.
D. ABC requires more data collection but is simpler to implement than traditional costing. - Which of the following best describes the “capacity cost rate” in activity-based management?
A. The cost per unit of output produced at full capacity.
B. The overhead rate used to allocate costs to products.
C. The rate charged to customers for using production capacity.
D. The fixed cost per unit of activity consumed. - What is the purpose of quality management in managerial accounting?
A. To track the financial impact of customer complaints.
B. To control costs associated with quality issues, such as rework and defects.
C. To measure the profitability of different products.
D. To allocate marketing costs for quality improvement efforts. - What does the concept of “emerging accounting issues” refer to?
A. New accounting standards and practices that are under development or gaining adoption.
B. Accounting issues that no longer require attention due to their resolution.
C. Established practices used for financial reporting in a stable market.
D. Techniques for reducing tax liabilities through accounting manipulation. - Which of the following is an example of an internal failure cost in the cost of quality framework?
A. Warranty claims.
B. Product recalls.
C. Costs associated with scrap and rework during production.
D. Repair costs for defective products sold. - Which of the following is an example of a non-financial performance measure used in strategic cost management?
A. Return on investment (ROI).
B. Customer satisfaction.
C. Profit margin.
D. Cost of goods sold. - How can emerging accounting issues influence managerial accounting?
A. By introducing new cost allocation methods that affect pricing strategies.
B. By reducing the importance of cost management in financial reporting.
C. By eliminating the need for activity-based costing systems.
D. By focusing only on the calculation of earnings per share. - In activity-based costing, how are costs assigned to products?
A. Based on direct labor hours worked.
B. Based on a combination of the direct material cost and the production time.
C. Based on the activities that drive costs, such as machine hours or setup times.
D. Based solely on the volume of products produced.