When Applying ABC Concepts to the Determination of Product Costs

question 16

True/False

When applying ABC concepts to the determination of product costs, the first step is to identify activities.

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Definitions:

Activity Base

A measure used to assign costs in activity-based costing, reflecting the volume of activity that drives costs.

Service Firm

A business that provides intangible products or services to consumers or other businesses.

Contribution Margin

The amount remaining from sales revenue after variable expenses are deducted, contributing to covering fixed costs and generating profit.

Machine Hours

A measure of production time, corresponding to the total hours that machines are in operation.