Question

True or False

1. Activity-based costing (ABC) eliminates arbitrary assignments of overhead.

2. Large inventories of raw materials must be maintained in a just-in-time system.

3. Production cost reports provide a basis for evaluating the productivity of a department.

4. Equivalent units of production is the sum of units completed and transferred out plus equivalent units of beginning work in process.

Answer 1

1 . FALSE..... .Activity-based costing (ABC) is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each.

2. TRUE... . Just in Time / JIT can provide significant benefits to a company, with the reduction of inventory costs the most important. With constant sales and reduction in inventory costs, the profit rate will grow

3. TRUE... and in addition managers can use cost data to access about total cost and unit cost.

4.Equivalent Units based on: Units completed this period + Units in Ending Work in Process Units from Beg. Work in Process completed + units started and completed + units in Ending Work in Process