In Allocating Fixed Costs to Products in Activity-Based Costing

question 32

Multiple Choice

In allocating fixed costs to products in activity-based costing,

• A)direct labor hours should always be used as the allocation base.
• B)a company should use the same allocation base that it uses for variable costs.
• C)a cost driver that is not volume-related should be used.
• D)machine hours should always be used.

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Definitions:

Physical Resources

Tangible assets such as buildings, machinery, and raw materials that an organization uses to conduct its business.

Visibility

The degree to which an entity's presence, actions, or status is known and perceivable by others.

Contingency

The dependence on chance or on the fulfillment of a condition; in management, it refers to the idea that there is no one best way to organize or lead, and that it will depend on various situational factors.

Networking

Networking is building and maintaining professional or social contacts to exchange information, support, and opportunities.