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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