Palgrave Macmillan: Companion website for Collis - Business Accounting: Chapter 16

Recent developments in manufacturing methods tend to:
1. lead to higher levels of closing stock
2. lead to a high hourly direct labour rate
3. use more direct labour
4. use complex technology
Activity-based costing is most suitable where:
1. there is only one product
2. the production process is simple
3. the production process is complex
4. management wants to use a blanket rate
In activity-based costing is assumed that costs are generated by:
1. indirect labour
2. activities
3. range of products manufactured
4. machine hours
Activity-based costing can be applied to:
1. purchasing functions
2. production functions
3. sales and administration functions
4. all of these
The use of techniques such as just-in-time make activity-based costing:
1. more relevant than absorption costing
2. less relevant than absorption costing
3. only suitable for small businesses
4. a method to be used in conjunction with absorption costing
An advantage of implementing an activity-based costing system is that:
1. it overcomes the need for trained and experienced management
2. it overcomes the problem of underabsorption or overabsorption of overheads
3. it is simpler and less complex than absorption costing
4. it provides more specific and reliable information than absorption costing

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