BUS5111 Applied Managerial Accounting Unit 5 Graded Quiz — 25
Q&A Verified Answers 2025
Course:
BUS5111 Applied Managerial Accounting — University of the People (UoPeople)
Level:
MBA
Year:
2025/2026
Format:
Graded Quiz Solutions — 25 Q&A with Verified Answers
BUS5111 Unit 5 Graded Quiz — Activity-Based Costing
25 Questions with Verified Answers | Score: 96/100
Question 1:
Which of the following best describes the fundamental difference between Activity-Based Costing
(ABC) and traditional overhead allocation methods?
A) ABC relies entirely on direct labor hours to allocate overhead, whereas traditional methods use
machine hours.
B) Traditional costing traces overhead costs directly to products, while ABC allocates them based
on sales volume.
C) ABC assigns overhead costs to activities first and then to products based on their consumption
of those activities, whereas traditional methods typically use a single plant-wide volume-based
rate.
D) Traditional methods are only used for non-manufacturing costs, while ABC is exclusively used
for manufacturing overhead.
Answer: C
Explanation:
Activity-Based Costing uses a two-stage allocation process where costs are first assigned to
activities (cost pools) and then allocated to products based on their use of those activities (cost
, drivers). Traditional methods, by contrast, usually rely on a single, volume-based measure like
direct labor hours to allocate all overhead, which can lead to cost distortion.
Question 2:
A company manufactures two products: a high-volume, simple product (Product A) and a low-
volume, complex product (Product B). If the company uses a traditional volume-based costing
system instead of ABC, what is the most likely outcome?
A) Product A will be undercosted and Product B will be overcosted.
B) Product A will be overcosted and Product B will be undercosted.
C) Both products will be accurately costed.
D) Both products will be undercosted, reducing overall reported profitability.
Answer: B
Explanation:
Under traditional volume-based costing, high-volume products absorb the majority of overhead
costs, regardless of the complexity of the manufacturing process. Therefore, the simple, high-
volume Product A ends up subsidizing the complex, low-volume Product B, leading to Product A
being overcosted and Product B being undercosted.
Question 3:
In the context of Activity-Based Costing, which of the following best defines a "cost driver"?
A) A temporary account used to accumulate overhead costs before allocation.
B) The total amount of direct materials and direct labor assigned to a specific job.
C) A factor or activity that causes a change in the cost of an activity cost pool.
D) A management strategy used to eliminate non-value-added activities.
Answer: C
Explanation:
A cost driver is the primary factor that causes or "drives" the costs within a specific cost pool to
increase or decrease. For example, the number of machine setups is a cost driver for the setup
cost pool, because more setups directly result in higher setup costs.
Question 4:
When implementing Activity-Based Costing, management must classify activities into a hierarchy.
Which of the following is considered a "batch-level" activity?
Q&A Verified Answers 2025
Course:
BUS5111 Applied Managerial Accounting — University of the People (UoPeople)
Level:
MBA
Year:
2025/2026
Format:
Graded Quiz Solutions — 25 Q&A with Verified Answers
BUS5111 Unit 5 Graded Quiz — Activity-Based Costing
25 Questions with Verified Answers | Score: 96/100
Question 1:
Which of the following best describes the fundamental difference between Activity-Based Costing
(ABC) and traditional overhead allocation methods?
A) ABC relies entirely on direct labor hours to allocate overhead, whereas traditional methods use
machine hours.
B) Traditional costing traces overhead costs directly to products, while ABC allocates them based
on sales volume.
C) ABC assigns overhead costs to activities first and then to products based on their consumption
of those activities, whereas traditional methods typically use a single plant-wide volume-based
rate.
D) Traditional methods are only used for non-manufacturing costs, while ABC is exclusively used
for manufacturing overhead.
Answer: C
Explanation:
Activity-Based Costing uses a two-stage allocation process where costs are first assigned to
activities (cost pools) and then allocated to products based on their use of those activities (cost
, drivers). Traditional methods, by contrast, usually rely on a single, volume-based measure like
direct labor hours to allocate all overhead, which can lead to cost distortion.
Question 2:
A company manufactures two products: a high-volume, simple product (Product A) and a low-
volume, complex product (Product B). If the company uses a traditional volume-based costing
system instead of ABC, what is the most likely outcome?
A) Product A will be undercosted and Product B will be overcosted.
B) Product A will be overcosted and Product B will be undercosted.
C) Both products will be accurately costed.
D) Both products will be undercosted, reducing overall reported profitability.
Answer: B
Explanation:
Under traditional volume-based costing, high-volume products absorb the majority of overhead
costs, regardless of the complexity of the manufacturing process. Therefore, the simple, high-
volume Product A ends up subsidizing the complex, low-volume Product B, leading to Product A
being overcosted and Product B being undercosted.
Question 3:
In the context of Activity-Based Costing, which of the following best defines a "cost driver"?
A) A temporary account used to accumulate overhead costs before allocation.
B) The total amount of direct materials and direct labor assigned to a specific job.
C) A factor or activity that causes a change in the cost of an activity cost pool.
D) A management strategy used to eliminate non-value-added activities.
Answer: C
Explanation:
A cost driver is the primary factor that causes or "drives" the costs within a specific cost pool to
increase or decrease. For example, the number of machine setups is a cost driver for the setup
cost pool, because more setups directly result in higher setup costs.
Question 4:
When implementing Activity-Based Costing, management must classify activities into a hierarchy.
Which of the following is considered a "batch-level" activity?
