Leverage Can Enable a Small Business Owner to Magnify the Potential

question 78

True/False

Leverage can enable a small business owner to magnify the potential returns expected.

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Definitions:

Activity-Based Costing

Activity-based costing is a method of allocating overhead costs to specific products or services based on the activities required to produce them, providing a more accurate reflection of the costs associated with each product or service.

Overhead Cost

The ongoing expenses of operating a business that are not directly attributable to creating the product or service, including rent, utilities, and administrative costs.

Activity Cost Pools

A grouping of all the costs associated with a particular activity, used in activity-based costing to allocate costs more accurately.

Departmental Overhead Rates

Ratios used to allocate indirect costs to different departments based on specific criteria, such as labor hours or machine use.