1. Which of the following is not a reason why an allocation base (cost driver; denominator activity) is used to allocate manufacturing overhead to cost objects (jobs/units of product/activities/etc.)?

a. Many types of manufacturing overhead costs are fixed even though production output fluctuates during the period.

b. It is imperative to identify the allocation base of a cost object in order to identify the actual manufacturing overhead costs that are caused by that cost object.

c.It is extremely difficult, and often impossible, to trace overhead costs to cost objects.

d. Manufacturing overhead costs consist of many different items indirectly affecting the manufacturing process.

2. In the calculation of a predetermined, plantwide overhead rate in a job-order costing system that uses machine-hours as the allocation base, which of the following would be used in the numerator and denominator?

a. Estimated manufacturing overhead / Estimated machine hours

b. Estimated manufacturing overhead / Actual machine hours

c. Actual machine hours / Actual manufacturing overhead

d. Estimated machine hours / Actual manufacturing overhead

3. Which of the following statements concerning Activity Based Costing (ABC) systems is false?

a.One of the major limitations of the system is the cost of implementing the system.

b. The system facilitates the use of benchmarking to identify areas for process improvements and non-value-added activities.

c. The system tends to utilize more cost pools, accumulate more like (similar) costs in those pools, and accommodate for the identification of more cost drivers than does a simple costing system that uses a predetermined, plantwide overhead rate.

d. Companies producing a wide variety of differing products are not good candidates for the use of an Activity Based Costing system and should use a simple or departmental costing system.