Activity-Based Costing eliminates the need for cost allocation.

A construction company allocates overhead using labor hours. After implementing ABC, management discovers that a project previously believed to be highly profitable becomes only marginally profitable. Which explanation is MOST likely?

A contractor notices that actual project costs are consistently lower than estimated costs. Which explanation is LEAST likely?

Which situation BEST demonstrates a failure of cost control rather than cost estimation?

An estimator intentionally excludes contingency allowances to make a bid more competitive. Which risk is MOST likely?

Which statement BEST reflects the relationship among job costing, cost control, and Activity-Based Costing?

A contractor wins a bridge project using a bid estimate prepared 18 months before construction begins. During execution:Steel prices increase by 25%Labor productivity declines because of labor shortagesEquipment utilization remains as plannedProject overhead remains unchangedThe project experiences a significant profit reduction. Which factor most directly explains why the original estimate became unreliable?

An inaccurate estimate can still produce a favorable cost variance if actual project performance exceeds expectations.

All indirect costs should be allocated using the same allocation base to maintain consistency.

A cost that is direct at the project level may become indirect when viewed from an individual work-package level.