Activity-based Costing MCQs

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on March 25, 2022

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Frequently Asked Questions

What is Activity-based Costing?

This accounting method of costing recognizes the relationship between costs, overhead activities, and manufactured products, assigning indirect costs to products less arbitrarily than traditional costing methods.

What is the primary benefit of activity-based costing?

Managers and employees may resist the change to activity-based costing. ABC procedures produce numbers that do not match traditional costing. ABC requires substantial resources.

What is the primary benefit of activity-based costing?

What is the primary benefit of activity-based costing?

How does Activity-based costing improve business processes?

Activity-based costing improves control over overhead costs, setting up equipment is a batch-level activity, in activity-based costing each cost pool has its predetermined overhead rate, and activity-based costing is less expensive to implement than traditional costing.

What are the steps in Activity-based costing?

First, identify the products that are the chosen cost objects, then identify the direct costs of the products, next, identify the direct prices of the products, and lastly, select the activities and cost-allocation bases for allocating indirect costs to the consequences for giving indirect costs to the products.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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