Which of the Following Is Not a Limitation of Activity-Based

question 25

Multiple Choice

Which of the following is not a limitation of activity-based costing

• A)Implementing an activity based costing system is more costly than implementing a traditional direct labour-based costing system.
• B)In practice, most managers insist on fully allocating all costs to products, customers, and other costing objects in an activity based costing system. This results in overstated costs.
• C)More accurate product costs may result in better decisions.
• D)Changing from a traditional direct labour based costing system to an activity-based costing system changes product margins and other key performance indicators used by managers.

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Definitions:

Cash Flow

The total amount of money being transferred in and out of a business, particularly in handling its operational activities and investments.

Project

An organized collection of connected tasks designed to be carried out within a specified timeframe and under predefined cost and constraints.

NPV

Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows over a period of time.

MIRR

Modified Internal Rate of Return, a financial metric that accounts for the cost of capital and reinvestment of cash flows.