Reference no: EM132667390

Consider the following statements.

Activity-based costing is more difficult in a service business because:

1. service businesses have a low proportion of overhead in their total costs.

2. service businesses tend to have a higher level of facility costs than most manufacturers.

3. it is often difficult to identify service activities because they are non-repetitive.

Problem 1: Which of the above statements is true?

A. 1

B. 2 only

C. 1 and 2

D*. 2 and 3

E. 1, 2 and 3

Problem 2: AAA company is reviewing the behavior of its various activities. AAA is considering various costs under process costing system. Their costing system utilizes two cost categories, direct materials and conversion costs. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production.

Data for February 2013 are:

Work in process, beginning inventory, 40% converted 200 units

Units started during February 600 units

Work in process, ending inventory 100 units

Costs A for February 2013 are:

Work in process, beginning inventory:

Direct materials $100,000

Conversion costs $100,000

Direct materials costs added during February $1,000,000

Conversion costs added during February $1,250,000

How many units were completed and transferred out of Department A during February?

Select one:

a. 600 units

b. 700 units

c. 800 units

d. 100 units