When Managers Use ABC Cost Allocation Rates for Decision Making

question 124

Multiple Choice

When managers use ABC cost allocation rates for decision making without distinguishing between flexible and committed costs, their estimates of incremental costs are biased upward or downward. If activity levels are steadily increasing over time, this bias would provide:

• A) Information that overstates costs
• B) Information that understates costs
• C) Accurate information
• D) Reliable information

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Definitions:

Impersonal Events

Situations or occurrences that do not involve personal interactions or relationships and are usually regarded in an objective or detached manner.

Recall

The ability to retrieve information or memories from one's past, often tested in psychological and cognitive research.

Reactive Aggression

A form of aggressive response provoked by frustration, threats, or experienced aggression, typically impulsive and out of immediate anger.

Aggression-Provoking Situations

Circumstances that are likely to trigger aggressive behaviors or responses due to stress, frustration, or perceived threats.