E7 - Answer True Difficulty 1 Objective 2 Terms to Learn...

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TRUE/FALSE 1. A top-selling product might actually result in losses for the company. Answer : True Difficulty : 2 Objective : 1 Terms to Learn : product undercosting 2. Companies that undercost products will most likely lose market share. Answer : False Difficulty : 2 Objective : 1 Terms to Learn : product undercosting Companies that overcost products will most likely lose market share. 3. If a company undercosts one of its products, then it will overcost at least one of its other products. Answer : True Difficulty : 2 Objective : 1 Terms to Learn : product-cost cross-subsidization 4. Direct costs plus indirect costs equal total costs. Answer : True Difficulty : 1 Objective : 2 Terms to Learn : activity-based costing (ABC) 5. When refining a costing system, a company should classify as many costs as possible as indirect costs. Answer : False Difficulty : 1 Objective : 2 Terms to Learn : refined costing system When refining a costing system, a company should classify as many costs as possible as direct costs. 6. In a homogeneous cost pool, all costs have a similar cause-and-effect relationship with the cost-allocation base.
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Unformatted text preview: Answer : True Difficulty : 1 Objective : 2 Terms to Learn : activity-based costing (ABC) 7. Activity-based costing helps identify various activities that explain why costs are incurred. Answer : True Difficulty : 1 Objective : 2 Terms to Learn : activity-based costing (ABC) 8. Direct tracing of costs improves cost accuracy. Answer : True Difficulty : 1 Objective : 2 Terms to Learn : activity-based costing (ABC) 9. An activity-based costing system is necessary for costing services that are similar. Answer : False Difficulty : 1 Objective : 3 Terms to Learn : activity-based costing (ABC) An activity-based costing system is only necessary when services are dissimilar and different amounts of resources are used by each service. 10. Traditional systems are likely to undercost complex products with lower production volume. Answer : True Difficulty : 2 Objective : 3 Terms to Learn : product undercosting...
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