The Use of Activity-Based Costing in Service Industries

question 150

Multiple Choice

The use of activity-based costing in service industries

• A) has the same objective as in manufacturing.
• B) results in improved costing of services provided.
• C) uses cost pools to assign overhead.
• D) all of these.

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Definitions:

Incremental Cash Flows

The additional operating cash flow that an organization receives from taking on a new project, distinct from the organization's existing cash flow.

Future Net Income

An estimation of a company's future earnings after all expenses and taxes have been subtracted from revenue.

Project

A project is a temporary endeavor designed to produce a unique product, service, or result with a defined beginning and end, often constrained by funding or deliverables.

Erosion Costs

Costs that occur when a new project leads to a decline in revenues or increase in expenses of existing products or services.