The Pareto Principle Is Important to Consider When an Organization

question 26

Multiple Choice

The Pareto principle is important to consider when an organization is

• A)assessing whether to employ activity-based costing versus attribute-based costing.
• B)evaluating the number of activities that are value-added versus those that are non-value-added.
• C)deciding whether to offer a product in one color versus in ten colors.
• D)determining whether simultaneous engineering activities will be impacted by the "Rule of One."

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Definitions:

Factory Overhead

The costs associated with manufacturing operations that are not directly traceable to a product, including costs related to the maintenance and operation of the factory.

Operating Expenses

Costs related to the day-to-day functioning of a business, excluding the cost of production.

Product Costs

The costs directly associated with the production of goods, including raw materials, labor, and manufacturing overhead.

Indirect Costs

Expenses not directly tied to a specific product, service, project, or activity, typically including utilities, rent, and administrative salaries.