Reference no: EM132967932

Problem 1: Which of the following is NOT a limitation of activity-based costing?

Select one:

a. Changing from a traditional direct labour-based costing system to an activity-based costing system changes product margins and other key performance indicators used by managers. Such changes are often resisted by managers.
b. Maintaining an activity-based costing system is more costly than maintaining a traditional direct labour-based costing system.
c. In practice, most managers insist on fully allocating all costs to products, customers, and other costing objects in an activity-based costing system. This results in overstated costs.
d. More accurate product costs may result in increasing the selling prices of some products.

Problem 2: Paul Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows:

Activity Cost Pool             Est. Cost          Product A            Product B            Total
Activity 1                        $22,000           400                      100                   500
Activity 2                        16,240             380                   200                     580
Activity 3                           14,600             500                    250                   750

The activity rate under the activity-based costing system for Activity 3 is closest to which of the following?

Select one:

a. $19.47.
b. $28.87.
c. $70.45.
d. $58.40.