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Supplementary objective test questions
CHAPTER 1 – ABC AND ABM
1.1 Which TWO of the following statements regarding the use of Activity
Based Costing (ABC) information are not correct?
1 An ABC system produces future information relating to product costs.
2 ABC can support decisions regarding changes to the range and mix of
products.
3 ABC systems are useful for longer-term decisions because all factors of
production become variable in the longer term.
4 Unlike traditional systems, ABC systems assume that products consume
activities in proportion to their production volumes.
5 ABC systems remedy the tendency of traditional costing systems to over-
cost high-volume products and under-cost low-volume products.
1.2 The main difference between ABC and ABM is that:
A ABC emphasises tracing costs to cost objects, while ABM emphasises
performance evaluation.
B ABC emphasises product costs, while ABM emphasises managing
processes and work.
C ABC emphasises tracing costs to cost objects, while ABM emphasises
tracing costs and managing processes and work.
D ABC includes activity management, while ABM excludes activity
management.
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