What is a transaction driver?

Multiple Choice

• An event that causes a transaction to begin.
• A measure of the amount of time required to perform an activity.
• An event that causes a transaction to end.
• A simple count of the number of times an activity occurs.

What is a duration driver?

Multiple Choice

• A simple count of the number of times an activity occurs.
• An activity measure that is used for the life of the company.
• A measure of the amount of time required to perform an activity.
• An activity measure that is used for the life of an activity-based costing system.

Which of the following statements about overhead allocation based on volume alone is correct?

Multiple Choice

• It is a key aspect of the activity-based costing model.
• It will systematically overcost high-volume products and undercost low-volume products.
• It will systematically overcost low-volume products and undercost high-volume products.
• It must be used for external financial reporting.

Unit-level activities arise as a result of the total volume of production and are performed each time a unit is produced.

True or False

Activity-based costing uses a number of activity cost pools, each of which is allocated to products on the basis of direct labour hours.

True or False

Transaction drivers usually take more effort to record than duration drivers.

True or False

Activity rates in activity-based costing are computed by dividing costs from the first-stage allocations by the activity measure for each activity cost pool.

True or False

Changing a cost accounting system is likely to meet with little resistance in an organization since it is a technical matter of little interest to individuals outside of the accounting department.

True or False

An activity-based costing system is generally easier to set up and run than a traditional cost system.

True or False

In activity-based costing, as in traditional costing systems, non-manufacturing costs are not assigned to products.

True or False

In the second-stage allocation in activity-based costing, activity rates are used to apply costs to products, customers, and other cost objects.

True or False