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Activity-Based Costing (ABC) is a two-stage method of cost assignment that assigns overhead costs to key activities, and then assigns those costs to products or services based on their use of those activities. True or False?
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Which of the following procedures best describes activity-based costing?
a) All overhead costs are recorded as expenses as incurred.
b) Overhead costs are assigned directly to products.
c) Overhead costs are assigned to activities; then costs are assigned to products.
d) Overhead costs are assigned to departments; then costs are assigned to products.
Sunflower, Inc. uses activity-based costing. The company produces two products, A and B. Information relating to the two products is as follows:

Units produced
A 19,000
B 25,000
A 7,500
B 8,500
Direct labor-hours
A 8,000
B 12,000
Materials handling (number of moves)
A 4,000
B 6,000
A 5,000
B 7,000

The following costs are reported:

Materials handling
Labor-related overhead

Setup costs assigned to B are:

a) $140,000
b) $112,000:
c) $175,000
d) $144,000
Which of the following is a true characteristic of activity-based costing?
a) Activity-based costing uses a smaller number of cost pools than does organizational-based costing.
b) Relative to traditional costing methods, activity-based costing is more concerned with identifying processes and less concerned with causal factors of overhead costs.
c) Activity-based costing removes the use of judgment from the allocation process.
d) Activity-based costing cannot be used to assign costs unless the activity cost drivers of those costs are identified.