Multiple Choice Questions: Activity Based Costing; Pricing

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Multiple Choice questions: ACTIVITY BASED COSTING; PRICING

1. Cost-plus pricing means that: (Answer B)

a. Selling price = Variable cost + (Markup percentage + Variable cost)

b. Selling price = Cost + (Markup percentage X Cost)

c. Selling price = Manufacturing cost + (Markup percentage + Manufacturing cost)

d. Selling price = Fixed cost + (Markup percentage X Fixed cost)

2. Activity based costing (Answer C)

a. Assigns only manufacturing costs to products and services

b. Is use to prepare external reports

c. Assigns both manufacturing and non-manufacturing cost to products and services

d. Allocates overhead using a single overhead pool

3. In transfer pricing, what would be a minimum acceptable transfer price if the selling division sold some units to the buying division assuming the selling division has no excess capacity. (Answer A)

a. Minimum transfer price = (Variable Cost + Lost Contribution Margin or opportunity cost)

b. Minimum transfer price = (Variable Cost)

c. Minimum transfer price = (Lost Contribution Margin or opportunity cost)

d. Minimum transfer price = (Market price)

4. Any event, action, transaction, or work sequence that causes a cost to be incurred in producing a product or providing a service. (Answer D)

a. Cost-Driver c. Activity Cost Pool

b. Activity d. Activity Based Costing

5. Activities required to support or sustain an entire production process and not dependent on number of products, batches, or units produced. (Answer C)

a. Batch-Level c. Facility-Level

b. Unit-Level d. Product-Level


1. The following information is provided for Mystique Co. for the new product it recently introduced.

Total unit cost $30

Desired ROI per unit $10

Target selling price $40

What would be...