Question

1. Which of the following costs is not a product?
   1. Wages paid to workers for rework on defective products
   2. Wages paid to truck loaders who load finished goods onto outgoing delivery trucks
   3. Fringe benefits paid to factory workers
   4. Wages paid to workers to idle time due to machine breakdown in a production department
2. ABC differs from traditional product costing because it uses multiple allocation bases and therefore, allocates costs (such as overhead costs) more accurately. This normally results in
   1. Equalizing set up costs for all product lines
   2. Lower set up costs being charged to low volume products
   3. Decreased units costs for low-volume products than is reported by traditional product costing systems
   4. Substantially greater unit costs for low-volume products than is reported by traditional product costing system.
3. The allocation base that would most likely be the best for allocating the indirect costs of marketing function is
   1. Number of shipments
   2. Number of sales person
   3. Number of customer phone calls
   4. Direct labor hours
4. The allocation base that would be most likely to be the best for allocating the indirect costs of the distribution function is
   1. Number of shipments
   2. Number of sales person
   3. Direct labor hours
   4. Machine hours

Answer 1

Solution:

1.The correct answer is option d.

Wages paid to workers to idle time due to machine breakdown in production department , as it is an abnormal idle time, Wages paid for abnormal idle time are not treated as a part of cost of production and they are debited to costing profit and loss account.

2.The correct answer is option d.

Substantially greater unit costs for low volume products than is reported by traditional product costing system.

3.The correct answer is option b

Number of sales persons

4.The correct answer is option a

Number of Shipments.

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