Although Adding More Activity Cost Pools to an Activity-Based Costing

question 2

Multiple Choice

Although adding more activity cost pools to an activity-based costing system may improve the accuracy of product costing, this increase in accuracy must be judged against:

• A)the cost of the product.
• B)the price of the product.
• C)the cost of developing and maintaining the additional cost pools.
• D)all of the above.

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Definitions:

Bank Service Charges

Fees charged by banks for maintaining accounts, processing transactions, and providing other financial services.

Credit Memo

A document issued by a seller to a buyer, reducing the amount that the buyer owes to the seller typically due to a return or a rebate.

Monthly Bank Statement

A document provided by a bank which summarizes all transactions in an account for a specific month.

Petty Cash System

A method for managing small, daily operational expenses through a readily accessible cash fund, requiring regular replenishment and accounting.