Question

1. Which of the following is an allocation base commonly used under the traditional methods for allocation of overhead costs?
a. A number of batches.
b. Direct labor-hours.
c. Indirect materials.
d. Number of customer orders.

2. All of the following are differences between ABC and traditional absorption costing except ________.
a. ABC system may assign nonmanufacturing costs to products
b. ABC allocates all manufacturing costs to products
c. ABC system uses many cost pools
d. ABC system may exclude some manufacturing costs, such as organization-sustaining costs

Answer 1

Answer:

1) b. direct labor hours

2) b. ABC allocates all manufacturing costs to products

Explanation:

The two most common allocation base for allocating overhead costs is direct labor hours per units produced, and machine hours per units produced.

Both ABC costing and traditional absorption costing methods allocate all manufacturing costs to products.