In General, the Risk of Measurement Error in an ABC

question 6

Multiple Choice

In general, the risk of measurement error in an ABC system increases when:

• A) Costs are traced rather than allocated
• B) Managers are uncertain about the relationship between costs and cost pools
• C) The number of cost pools decreases
• D) A company uses a team approach to systems design

---

Definitions:

Net Investment Income

The income received from investment assets (like dividends, interest, and capital gains) after deducting related expenses.

Borrowed Funds

Money that has been loaned to a borrower, which must typically be repaid with interest.

Phase-Out

A gradual reduction or elimination of a tax benefit or deduction as a taxpayer's income reaches or exceeds certain thresholds.

Itemized Deductions

Eligible expenses that individuals can claim on their tax returns to reduce their taxable income, such as mortgage interest, medical expenses, and charitable donations.