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:

Economic Goods

Items or services that have monetary value and are scarce in relation to their demand, thus requiring sacrifice to obtain them.

Protective Function

A role often played by governmental bodies to ensure the safety and security of its citizens, through measures like law enforcement and military defense.

Legal Enforcement

The process of ensuring compliance with laws, regulations, and rules through sanctions or penalties.

Contracts

Legally binding agreements between two or more parties that establish obligations, rights, and responsibilities.