One Difference Between a Traditional Costing System and an ABC

question 78

Multiple Choice

One difference between a traditional costing system and an ABC system is:

• A) An ABC system allocates overhead to units of goods or services
• B) An ABC system has more cost pools and more cost drivers
• C) An ABC system traces direct materials to units and considers them to vary with volume
• D) Information from an ABC system can be used for GAAP

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Definitions:

Accounts Receivable Financing

A type of financing arrangement in which a company uses its receivables as collateral for a loan, effectively selling its right to future payments in exchange for immediate cash.

Factored Receivables Financing

A financial transaction in which a business sells its accounts receivable to a third party at a discount in exchange for immediate cash.

Banker's Acceptance

A short-term financial instrument issued by a company that is guaranteed by a commercial bank, commonly used in international trade.

Inventory Period

The average time it takes for inventory to be sold and replaced during a given period.