Traditional Costing and Activity-Based Costing Share Some Similarities, but Are

Short Answer

Traditional costing and activity-based costing share some similarities, but are also different in significant ways. For each statement below, indicate whether it is a characteristic of: (A)activity-based costing only, (T)traditional costing only, (B)both traditional and activity-based costing, or (X)neither traditional nor activity-based costing.
____ 1. Allocates direct costs to cost of goods sold
____ 2. Assigns manufacturing production costs to individual units in inventory
____ 3. Attempts to trace costs more accurately to products, product lines or departments
____ 4. Can employ multiple cost pools
____ 5. Commonly uses labour or machine hours as a cost allocation base
____ 6. Costs are assigned to units in the first stage; units to inventory in the second
____ 7. Requires judgment to develop allocation rates
____ 8. Multiple cost pools and drivers are used in the allocation process
____ 9. Originally developed primarily to assign costs to products for financial reporting
____ 10. Overhead costs are first assigned to pools, then allocated to individual units