Costing MCQ Questions and Solutions with Explanations | Commerce

Flexible budget variable = Number of units × per unit price
= 3000 × $500 = $1,500,000

Sales volume variance = Flexible budget amount - Static budget amount
= $15000 - $6000 = $9,000

An approach in which company under-costs it's one product and over-costs at least one product is classified as product-cost cross subsidizing. Product-cost cross-subsidization is the strategy of pricing a product above its market value to subsidize the loss of pricing a different product below its market value.

Budgeted total cost in indirect cost pool is divided by budgeted total quantity of cost allocation base is to calculate by budgeted indirect cost rate. The budgeted indirect cost rate formula is calculated by dividing the budgeted annual indirect costs by the budgeted annual quantity of the cost allocation base.

In an activity based cost system; an activity/unit of work or task with differentiated purposes will be classified as an activity. Activity-based costing (ABC) is an accounting method that identifies and assigns costs to overhead activities and then assigns those costs to products.

Costs of all activities for individual products or services can be called output-unit level costs. Output unit level costs are the costs of activities.

In an activity based costing implementation, product's diverse demand is based on batch size, complexity and process steps.

Broad's average use to assign cost of revenue to cost objects will be classified as refined costing system. A refined costing system reduces the use of broad averages for assigning the cost of resources to cost objects (such as jobs, products, and services) and provides better measurement of the costs of indirect resources used by different cost objects no matter how differently various cost objects use indirect resources.

Costs of all activities for a group of products, rather than individual product can be classified as batch level costs. A batch-level cost is a cost related to a group of units, but which is not associated with specific individual units.

Product which requires low amount of resources, but incur high per unit cost is classified as product over costing. Product costing is also known as traditional costing. This method seeks to allocate all costs down to individual units of finished product.