Under Activity Based Costing (ABC), costs are allocated based on: MCQ with Answer and Explanation

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Under Activity Based Costing (ABC), costs are allocated based on:

A. Volume of Production only

B. Direct Labor Hours

C. Machine Hours

D. Cost Drivers

Answer: Option D

Solution (By JKSSB Mock Tests)

ABC traces overheads to specific activities and allocates them to products based on the consumption of 'cost drivers'.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

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A company issues 10,000 equity shares of ₹10 each at a premium of ₹5. The amount credited to Securities Premium A/c is:

A. ₹50,000

B. ₹10,000

C. ₹1,50,000

D. ₹1,00,000

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Correct Answer: Option A

Explanation:
Securities premium = shares * premium per share = 10,000 * 5 = ₹50,000.

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Question #2

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The 'Non-Current Assets Held for Sale' (Ind AS 105) are measured at:

A. Lower of carrying amount and fair value less costs to sell

B. Cost

C. Fair value

D. Revaluation amount

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Correct Answer: Option A

Explanation:
Ind AS 105 requires measurement at lower of carrying amount and fair value less costs to sell.

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Question #3

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In 'Standard Costing', the formula for 'Material Usage Variance' is:

A. Actual Quantity × (Standard Price - Actual Price)

B. Standard Price × (Standard Quantity - Actual Quantity)

C. Standard Quantity × (Standard Price - Actual Price)

D. Actual Price × (Standard Quantity - Actual Quantity)

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Correct Answer: Option B

Explanation:
Material usage variance = SP (SQ - AQ).

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