Discuss APICS CPIM-Part-2 Exam Topic 1 Question 34

An advantage of activity-based costing (ABC) is:

Ait allows raw material costs to be allocated on a per unit basis.

Bit uses cost drivers to allocate costs to products.

Cit is easier to establish standard costs.

Dit enables overhead costs to be allocated evenly across all products.

Suggested Answer: B

A quantitative model is a mathematical representation of a real-world situation that involves numbers, variables, equations, and logic. A quantitative model can be used to support sales and operations planning (S&OP), which is a process of aligning the demand and supply plans of an organization at an aggregate level. To develop a quantitative model for S&OP, the following statements are most true:

It isnotnecessary to capture all of the detail in order to create a useful model. In fact, too much detail can make the model complex, unrealistic, and difficult to solve.A useful model should capture the essential features of the situation and simplify the irrelevant or insignificant aspects1.

Aggregation will benecessaryto develop an appropriate model. Aggregation is the process of combining data or information into higher-level categories or groups. For example, products can be aggregated into product families, customers can be aggregated into market segments, and time periods can be aggregated into months or quarters.Aggregation can help reduce the size and complexity of the model, as well as improve its accuracy and reliability2.

Clear objectives arenecessaryto begin the modeling process. Objectives are the desired outcomes or goals that the model aims to achieve or optimize. For example, an objective of S&OP could be to maximize profit, minimize cost, or balance inventory.Clear objectives can help define the scope, structure, and criteria of the model3.

Asignificantlevel of effort is required to develop a model. Developing a model involves several steps, such as defining the problem, collecting and analyzing data, formulating and testing the model, implementing and validating the solution, and evaluating and improving the results.Each step requires careful planning, execution, and evaluation4.

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34 comments · newest first

Ashleigh 10 months ago

Yeah, B is definitely the best choice here!

Martina 11 months ago

Allocating overhead evenly? That's not really accurate, right?

Rosalind 11 months ago

Wait, are we sure it’s easier to establish standard costs?

Willard 11 months ago

I totally agree, option B is the way to go.

Na 11 months ago

ABC uses cost drivers to allocate costs, that's a big plus!

Princess 12 months ago

I feel like I’ve seen a question that mentioned ABC helps with overhead allocation, but I can't recall if that was option D or something else.

Lavina 12 months ago

I’m a bit confused about option A; I thought ABC was more about indirect costs rather than just raw materials.

Keena 12 months ago

I remember practicing a question about how ABC allocates costs more accurately, so I feel like B is definitely the right choice here.

Shawnda 1 year ago

I think option B is correct because ABC focuses on cost drivers, but I'm not entirely sure how that differs from traditional costing.

Claudio 1 year ago

Okay, let me see. The question is asking about the advantages of ABC, so I need to think about how it differs from other costing systems. I'll eliminate the options that don't seem to match the description of ABC.

Caren 1 year ago

Ah, I remember learning about this in class. ABC uses multiple cost drivers to allocate overhead costs more accurately than traditional methods. I'm pretty confident I can identify the right answer here.

Avery 1 year ago

Hmm, I'm a bit unsure about this one. I know ABC is different from traditional costing, but I'm not totally clear on the specific advantages. I'll have to think it through carefully.

Jesusita 1 year ago

This question seems straightforward. I think the key is understanding how ABC allocates costs using cost drivers, so I'll focus on that.

Delfina 1 year ago

If I had a penny for every time someone tried to 'evenly' allocate overhead, I'd be rich! B) is clearly the correct answer here.

Teddy 1 year ago

↳ replying to Delfina

Glad we're on the same page about this!

Lazaro 1 year ago

↳ replying to Delfina

It's a much more accurate way to assign overhead costs.

Graciela 1 year ago

↳ replying to Delfina

Definitely, that's the key advantage of activity-based costing.

Cherilyn 1 year ago

↳ replying to Delfina

I agree, B) it uses cost drivers to allocate costs to products.

Sophia 1 year ago

Ah, the age-old debate of ABC vs traditional costing. I'm going with B) because it just makes more sense to me than the other options.

Verlene 1 year ago

B) is the way to go. I remember learning that ABC is all about identifying the activities that drive costs and assigning those costs accordingly.

Alishia 1 year ago

↳ replying to Verlene

B) is the way to go. I remember learning that ABC is all about identifying the activities that drive costs and assigning those costs accordingly.

Fernanda 1 year ago

↳ replying to Verlene

B) it uses cost drivers to allocate costs to products.

Sharee 1 year ago

↳ replying to Verlene

A) it allows raw material costs to be allocated on a per unit basis.

Noah 1 year ago

I was going to say D), but then I realized that evenly allocating overhead across all products kind of defeats the purpose of ABC.

Arlyne 1 year ago

↳ replying to Noah

C) it is easier to establish standard costs.

Gwenn 1 year ago

↳ replying to Noah

B) it uses cost drivers to allocate costs to products.

Elbert 1 year ago

↳ replying to Noah

A) it allows raw material costs to be allocated on a per unit basis.

Penney 1 year ago

B) It uses cost drivers to allocate costs to products. This allows for a more accurate representation of the true costs associated with each product.

Donte 1 year ago

↳ replying to Penney

C) it is easier to establish standard costs.

Laurena 1 year ago

↳ replying to Penney

B) it uses cost drivers to allocate costs to products.

Staci 1 year ago

↳ replying to Penney

A) it allows raw material costs to be allocated on a per unit basis.

Laura 2 years ago

I believe D is incorrect because ABC enables overhead costs to be allocated based on the actual usage by each product.

Alease 2 years ago

I agree with Edelmira. Cost drivers help in more accurate cost allocation.

Edelmira 2 years ago

I think the advantage of ABC is that it uses cost drivers to allocate costs to products.

APICS CPIM-Part-2 Exam - Topic 1 Question 34 Discussion