Finding a Strong Statistical Association Between an Activity Cost and an Activity

question 51

True/False

Finding a strong statistical association between an activity cost and an activity driver can provide evidence to managers about the correctness of a driver selection.

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Definitions:

Variable Costing

An accounting method that only includes variable costs (costs that change with production levels) in product costs.

Absorption Costing

An accounting method that allocates all manufacturing costs, including both fixed and variable costs, to the product, used for external financial reporting and tax purposes.

Contribution Format

A type of income statement format that separates fixed costs from variable costs to highlight the contribution margin.

Income Statement

A financial report that shows a company’s revenues, expenses, and net income over a specific period, illustrating the company’s financial performance.