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B Com Exam  >  B Com Tests  >  Test: Activity Based Costing - 2 - B Com MCQ

Test: Activity Based Costing - 2 - B Com MCQ


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10 Questions MCQ Test - Test: Activity Based Costing - 2

Test: Activity Based Costing - 2 for B Com 2024 is part of B Com preparation. The Test: Activity Based Costing - 2 questions and answers have been prepared according to the B Com exam syllabus.The Test: Activity Based Costing - 2 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Activity Based Costing - 2 below.
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Test: Activity Based Costing - 2 - Question 1
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What is a cost driver in the context of cost analysis?

Detailed Solution for Test: Activity Based Costing - 2 - Question 1
A cost driver is a factor or variable that has a direct cause and effect relationship with the total cost of a particular activity or process. It determines how costs are incurred, and changes in the cost driver can lead to changes in the total cost. For example, in the context of running a car, the number of kilometers driven (cost driver) directly affects the total cost of fuel. Understanding cost drivers is essential for effective cost management and decision-making.
Test: Activity Based Costing - 2 - Question 2
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Which of the following is NOT an example of a cost driver?

Detailed Solution for Test: Activity Based Costing - 2 - Question 2
The cost of fuel is not a cost driver but rather an expense itself. Cost drivers are factors that cause costs to be incurred, such as the number of purchase orders, machine setups, or machine hours, which directly influence the total cost of specific activities.
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Test: Activity Based Costing - 2 - Question 3
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In ABC costing, what is an activity cost pool?

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An activity cost pool is a temporary account used in activity-based costing (ABC) to accumulate and total the costs associated with a specific group of similar activities. It includes both fixed and variable costs related to those activities, providing a more accurate representation of the costs incurred.
Test: Activity Based Costing - 2 - Question 4
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What is the primary advantage of using cost drivers in cost analysis?
Detailed Solution for Test: Activity Based Costing - 2 - Question 4
Cost drivers enable accurate determination of product costs by establishing a cause-and-effect relationship between activities and their associated costs. This accuracy is crucial for making informed decisions about product pricing, cost reduction strategies, and resource allocation.
Test: Activity Based Costing - 2 - Question 5
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Which step in ABC costing involves assigning costs to activity pools?
Detailed Solution for Test: Activity Based Costing - 2 - Question 5
Assigning costs to activity pools is part of the step known as "Assign Costs to Cost Objects" in the ABC costing process. This step involves allocating the accumulated costs in activity pools to specific cost objects, such as products or services.
Test: Activity Based Costing - 2 - Question 6
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What is the main advantage of using ABC costing in product pricing decisions?
Detailed Solution for Test: Activity Based Costing - 2 - Question 6
One of the main advantages of using ABC costing in product pricing decisions is its ability to accurately allocate overhead costs to products based on their actual consumption of activities. This ensures that the pricing reflects the true cost structure, leading to more informed pricing decisions.
Test: Activity Based Costing - 2 - Question 7
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Why is ABC costing particularly beneficial for organizations with diverse product lines?
Detailed Solution for Test: Activity Based Costing - 2 - Question 7
ABC costing is beneficial for organizations with diverse product lines because it provides accurate product cost data that takes into account the specific activities and resources required for each product. This accuracy is essential when dealing with a wide range of products with varying cost structures.
Test: Activity Based Costing - 2 - Question 8
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What is the primary focus of activity-based management (ABM) in ABC costing?
Detailed Solution for Test: Activity Based Costing - 2 - Question 8
The primary focus of activity-based management (ABM) within ABC costing is to manage activities in a way that reduces costs. ABM aims to identify and improve the efficiency of activities, leading to cost reduction and better cost management.
Test: Activity Based Costing - 2 - Question 9
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How does ABC costing benefit service organizations like banks and hospitals?
Detailed Solution for Test: Activity Based Costing - 2 - Question 9
ABC costing benefits service organizations like banks and hospitals by providing accurate cost data that aids in decision-making. Since these organizations have complex cost structures, ABC helps them understand and manage costs more effectively.
Test: Activity Based Costing - 2 - Question 10
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What is the key to the value of activity-based costing (ABC)?
Detailed Solution for Test: Activity Based Costing - 2 - Question 10
The key to the value of activity-based costing (ABC) is accurate cost allocation. ABC ensures that costs are allocated to products or activities based on their actual consumption, leading to more precise cost information for better decision-making. This accuracy is crucial for cost management and competitive advantage.
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