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US CMA Part 1 Activity-Based Costing — practice questions

Explore 23 free Activity-Based Costing questions in US CMA Part 1 Management Accounting. Open each question or exercise to read its content, reference answers and available explanation.

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Activity-Based Costing questions and exercises with answers

Showing questions 1–23 of 23.

Activity-based costing assigns overhead to products based on the various:Read the answer and worked solution →Activity-based costing is described as a process having how many stages?Read the answer and worked solution →A cost pool is described as a list of costs incurred when related activities are:Read the answer and worked solution →The traditional allocation system assigns manufacturing overhead using how many cost drivers?Read the answer and worked solution →An activity is defined as an action or process involved in the production of:Read the answer and worked solution →Absorption costing is named as the acceptable reporting method under:Read the answer and worked solution →A predetermined overhead rate divides estimated manufacturing overhead by the estimated:Read the answer and worked solution →A cost incurred each time a unit of product is produced is described as a:Read the answer and worked solution →Costs of purchasing and receiving materials are given as an example of a:Read the answer and worked solution →Engineering, testing and quality control costs are given as examples of a:Read the answer and worked solution →Under variable costing, fixed overhead costs are treated in which way?Read the answer and worked solution →Absorption costing applies all direct costs, fixed overhead and variable overhead to the:Read the answer and worked solution →In the five stages of activity-based costing, activity rates are calculated for each:Read the answer and worked solution →Why is activity-based costing described as a more accurate way of allocating overhead?Read the answer and worked solution →Fixed overhead is $12,000 and 10,000 units are made. Under absorption costing each unit carries:Read the answer and worked solution →When the entire finished goods inventory is sold, net income under the two methods is:Read the answer and worked solution →One stated disadvantage of activity-based costing is that the method is:Read the answer and worked solution →Moving to activity-based costing tends to change the per-unit cost of low-volume products how?Read the answer and worked solution →Order the five ABC stagesRead the answer and worked solution →Sort costs by their levelRead the answer and worked solution →Traditional versus ABCRead the answer and worked solution →Absorption or variableRead the answer and worked solution →Work the per-unit numbersRead the answer and worked solution →

Worked practice questions

Activity-based costing assigns overhead to products based on the various:

  1. Activities that drive costs
  2. Auditors that review costs
  3. Investors that supply funds
  4. Customers that place orders
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Correct answer: A. Activities that drive costs

1. Overhead has to be attached to products by some rule. 2. Activity-based costing is the process that assigns overhead to products. 3. It does so based on the various activities that drive overhead costs. 4. The activities, not the auditors or investors, decide the split. _Source: OpenStax Principles of Accounting Volume 2, Managerial Accounting (CC BY-NC-SA 4.0), Ch 6 'Activity-Based, Variable, and Absorption Costing', sections 6.1-6.5_

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Activity-based costing is described as a process having how many stages?

  1. Ten stages
  2. Five stages
  3. Nine stages
  4. Two stages
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Correct answer: B. Five stages

1. The method is set out as a fixed sequence. 2. ABC is a five-stage process. 3. Those five stages allocate overhead more precisely than tradition does. 4. So the count is five. _Source: OpenStax Principles of Accounting Volume 2, Managerial Accounting (CC BY-NC-SA 4.0), Ch 6 'Activity-Based, Variable, and Absorption Costing', sections 6.1-6.5_

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A cost pool is described as a list of costs incurred when related activities are:

  1. Performed
  2. Cancelled
  3. Forgotten
  4. Postponed
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Correct answer: A. Performed

1. Costs are gathered before they are spread. 2. A cost pool is a list of costs incurred when related activities are performed. 3. The pool exists because the work happened, not because it was dropped. 4. So the answer is performed. _Source: OpenStax Principles of Accounting Volume 2, Managerial Accounting (CC BY-NC-SA 4.0), Ch 6 'Activity-Based, Variable, and Absorption Costing', sections 6.1-6.5_

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