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Similar to Other Costing Systems That Include Allocation, ABC Cost

question 44

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Similar to other costing systems that include allocation, ABC cost information may be misleading for decision making purposes. To combat this problem, costs within an activity can be classified as:


Definitions:

Scratch-and-Save

A promotional discount method where customers scratch a card to reveal a discount or prize.

Profit

The financial gain realized when the revenue generated from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.

Rate of Markdown

The percentage decrease from the original price to the sale price.

Operating Expenses

Costs associated with the day-to-day operations of a business or organization.

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