When Implementing an ABC System, the Accounting Information System May

question 88

Multiple Choice

When implementing an ABC system, the accounting information system may require modifications to

• A) Include fewer ledger accounts:
• B) Include only costs from the most recent periods
• C) Gather and report activity and cost driver information
• D) Include more ledger accounts

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Definitions:

Payback Period

This is the length of time required to recover the initial investment cost of a project, calculated by dividing the investment amount by the annual cash inflows.

Net Present Value

A calculation that compares the value of all cash inflows and outflows of a project or investment by discounting them to their present value.

Straight-Line Depreciation

A technique for distributing the expense of a physical asset across its lifespan in consistent yearly installments.

Required Rate Of Return

The rate that is generally based on the company’s cost of capital.