1. Activity based costing should be considered for overhead application in cases where:

Multiple Choice

• A company produces a wide variety of products

• Production processes have changed since the start of the company

• All of the answers listed are valid reasons for implementing Activity Based Costing

• A companys overhead costs are high

2. The margin of safety is computed as the current sales dollars minus last years sales dollars.

True or False

3. Using Activity Based Costing is imperative for certain companies in order to calculate an accurate per unit product cost and therefore determine an appropriate sales price for products.

True or False

4. The Richmond Corporation uses the weighted-average method in its process costing system. The company has only a single processing department. The company's ending work in process inventory on August 31 consisted of 19,400 units. The units in the ending work in process inventory were 100% complete with respect to materials and 60% complete with respect to labor and overhead. If the cost per equivalent unit for August was $3.10 for materials and $4.60 for labor and overhead, the total cost assigned to the ending work in process inventory was:

Multiple Choice

• $95,836

• $113,684

• $149,380

• $89,628

5.

When a company implements activity-based costing, activity rates are calculated based on actual activities as they occur during the accounting period.

True or False