Part One

Activity-based costing (ABC) is a costing technique that uses a two-stage allocation process. Which of the following statements best describes these two stages? Select one:

a. Direct costs are allocated to the production departments based on a predetermined overhead rate.

b. The costs are assigned to activities, and then to the products based upon their use of the activities.

c. Indirect costs are assigned to activities, and then to the products based upon the direct cost resources used by the activities.

d. The costs are assigned to departments, and then to the products based upon their use of activity resources.

e. none of the given answer.

Which of the following statements is/are true? Select one:

a. In a production budget, beginning inventory in units plus budgeted units to be produced equals unit sales minus targeted ending inventory in units.

b. One disadvantage of participative budgeting is employees' tendency to overestimate of revenues.

c. All of the given statements are true

d. Production and inventory budgets form the basis for developing the sales budget.

e. When managers intentionally set budgeted costs too high and budgeted revenues too low, they are creating budgetary slack.