Which of the Following Is True of Activity-Based Costing

question 12

Multiple Choice

Which of the following is true of activity-based costing?

• A) More cost pools
• B) Same base as traditional costing
• C) Less costly to use
• D) Eliminates arbitrary allocations

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Definitions:

Income Statement

A financial statement that shows a company's revenue, expenses, and profit over a particular period, providing insight into its financial performance.

Fixed Costs

Fixed Costs are expenses that do not change with the level of production or sales, such as rent or salaries.

Volume of Activity

A measure of the quantity of work performed or the level of operations, often used to allocate overhead costs in activity-based costing.

Indirect Costs

Indirect costs are expenses that are not directly tied to a specific project, product, or activity, often including overhead costs like administration, facilities, and security.