Activity-Based Costing Is Not Appropriate for Service Providers Since They

question 75

True/False

Activity-based costing is not appropriate for service providers since they do not have manufacturing overhead that needs to be assigned to products.Although service providers do not have manufacturing overhead,they incur many indirect costs,such as rent,supplies,supervision,advertising,and administrative expenses.ABC can be used to assign these costs to different services and customers.

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Definitions:

External Financing Needed

The amount of funding a company needs to raise from outside sources to finance its business operations or growth plans.

Long-Term Debt

Borrowings that are due to be repaid more than one year from the date of the financial statement.

Dividend Payout

A portion of a company's earnings that is distributed to shareholders.

External Financing Needed

The additional funding a firm requires to finance its spending plans, such as investments in fixed assets or increases in working capital, beyond what can be funded by internal sources.