For an Activity Base to Be Useful in Cost Behavior

question 182

Multiple Choice

For an activity base to be useful in cost behavior analysis

• A) the activity should always be stated in dollars.
• B) there should be a correlation between changes in the level of activity and changes in costs.
• C) the activity should always be stated in terms of units.
• D) the activity level should be constant over a period of time.

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Definitions:

AOQ

Average Outgoing Quality, a measure in quality control that represents the average quality level of products leaving the manufacturing process.

Type I Error

Statistically, the probability of rejecting a good lot.

Good Lot

A term used in quality control to describe a batch of products that meet specified quality standards.

AQL

Acceptable Quality Level, a statistical measurement used in quality control that defines the maximum number of defective items allowed in a sample lot.