estimates provided for the coming year: Cost Pool Overhead Costs Cost driver Activity level Supervision of direct labor $320,000 Direct labor-hours 800,000 Machine maintenance $120,000 Machine-hours 960,000 Facility rent $200,000 Square feet of area 100,000 Total overhead costs $640,000 The accounting records show the Mossman Job consumed the following resources: Cost driver Actual level Direct labor-hours 200 Machine-hours 1,600 Square feet of area 50 1) Which method of allocation probably best estimates actual overhead costs used? Why? A) Single direct labor-hours cost driver because it is best to allocate total costs uniformly to individual jobs. B) Single direct labor-hours cost driver because it is easiest to analyze and interpret. C) Three activity-cost drivers because they best reflect the relative consumption of resources. D) Three activity-cost drivers because product costs can be significantly cross-subsidized. 2) It only makes sense to implement an ABC system when: A) ABC provides information to make better decisions B) Its benefits exceed implementation costs C) ABC traces more costs as direct costs D) There is a strong cause-and-effect relationship between costs in the cost pools and their cost- allocation bases 3) Which of the following is a sign that an ABC system may be useful? A) There are small amounts of indirect costs. B) Products make diverse demands on resources because of differences in volume, process steps, batch size, or complexity. C) Products a company is less suited to produce and sell show small profits. D) Operations staff agrees with accountants about the costs of manufacturing and marketing products and services. 4) Activity-based costing systems provide better product costs when they A) Employ more activity-cost drivers B) Employ fewer activity-cost drivers C) Identify and cost more indirect cost differences among products D) Always yield more accurate product costs than traditional systems 5) The goal of a properly constructed ABC system is to: A) Have the most accurate cost system B) Identify more indirect costs C) Develop the best cost system for an economically reasonable cost D) Have separate allocation rates for each department