In Comparison with a System That Uses a Single, Volume-Based

question 45

Multiple Choice

In comparison with a system that uses a single, volume-based cost driver, an activity-based costing system is preferred when a company has:

• A) a large proportion of non-unit-level activities.
• B) product-line diversity.
• C) minimal product-line diversity and a small proportion of non-unit-level activities.
• D) existing variances from budgeted amounts.
• E) product-line diversity and a large proportion of non-unit-level activities.

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Definitions:

Disagreement Value

The worth or specific outcome that parties in a negotiation anticipate they could receive if they fail to come to an agreement and decide to pursue other options.

Opportunity Costs

The cost of what is foregone by choosing one alternative over another, representing the benefits that could have been received from the next best alternative.

Bargaining Position

The relative power or leverage that a party has during negotiations to influence the terms in their favor.

Supplier Merges

The act of two or more suppliers combining their operations, often to increase efficiency or market power.