Costs May Be Allocated to a Product or Activity for Many

question 55

Multiple Choice

Costs may be allocated to a product or activity for many purposes, but care must be exercised when using allocated costs because:

• A)direct costs identified with the product or activity may not be accurately assigned.
• B)fixed costs will change in total if the volume of activity changes.
• C)all costs may not have been allocated to the product or activity.
• D)arbitrarily allocated costs may not behave in the way assumed in the allocation method.

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Definitions:

Resources

The inputs used in the production of goods and services, including labor, capital, land, and entrepreneurship.

Individual Choices

Decisions made by individuals based on their preferences and circumstances, affecting their personal welfare and the allocation of resources.

Incentives

Financial or non-financial rewards designed to encourage specific behaviors or actions from individuals or entities.

Opportunities

Opportunities refer to favorable situations or conditions that could lead to the achievement of goals or the advancement in a certain area, often requiring timely and strategic action to capture.