Question

11. In an activity-based costing system, direct materials used would typically be classified as a:

A. unit -level cost.

B. batch-level cost.

C. product-sustaining cost.

D. facility-level cost.

E. matrix-level cost.

12. Which of the following tasks is not normally associated with an activity-based costing system?

A. Calculation of pool rates.

B. Identification of cost pools.

C. Preparation of allocation matrices

D. Identification of cost drivers.

E. Assignment of cost to products.

13. Which of the following costs changes in direct proportion to a change in the activity level?

A. Variable cost.

B. Fixed cost.

C. Semi variable cost.

D. Step-variable cost.

E. Step-fixed cost.

14. A company observed a decrease in the cost per unit. All other things being equal, which of the following is most likely true?

A. The company is studying a variable cost, and total volume has increased.

B. The company is studying a variable cost, and total volume has decreased.

C. The company is studying a fixed cost, and total volume has increased.

D. The company is studying a fixed cost, and total volume has decreased.

E. The company is studying a fixed cost, and total volume has remained constant.

15. When graphed, a typical fixed cost appears as:

A. a horizontal line.

B. a vertical line.

C. a u-shaped line.

D. a diagonal line that slopes downward to the right.

E. a diagonal line that slopes upward to the right.

16. Straight-line depreciation is a typical example of a:

A. variable cost.

B. step-variable cost.

D. mixed cost.

C. fixed cost.

E. curvilinear cost.

17. Costs that remain the same over a wide range of activity, but jump to a different amount outside that range, are known as:

A. step-fixed costs.

B. step-variable costs.

C. semi variable costs.

D. curvilinear costs.

E. mixed costs.

Answer 1

. Question 11 - In an activity-based costing system, direct materials used would typically be classified as a " UNIT - LEVEL COST ".

Option A - Unit level Cost is the right answer.

Unit level activities are those activities for which the consumption of resources is identified based on the number of units produced. These costs directly vary with the number of units products. The direct material used in production is directly linked to the number of units of the output produced. Hence, direct material is classified as an unit-level cost.

Option B - Batch level cost is not the right answer.

These costs are driven by the "number of batches of units produced". This cost remains fixed for all units in the batch and varies with the number of batches. Direct material is required for each output and hence, its requirement varies with the each unit in a batch.

]Option C - Product-sustaining cost is not the right answer.

These costs relate to the product line as a whole. These are the costs incurred to support the products in the product line. Direct material is a direct cost related to the product manufacturing and cannot be classified as a supporting cost. Hence, this option is not correct.

Option D - Facility level cost is not the right answer.

These are the costs incurred to sustain the entire manufacturing facility and cannot be attributable to individual product. Direct material is directly linked to production of each individual unit in a product, hence it can be easily traced to a particular product. Therefore, direct material cannot be classified as a facility level cost.

Option E - Matrix level costs is not the right answer.

As mentioned above, direct material cost is a direct cost linked to an individual unit, it cannot be attributed to the matrix of cost structures.