In the Activity Identification Stage of Implementing an Activity-Based Costing

question 103

Multiple Choice

In the activity identification stage of implementing an activity-based costing system, defining activities in greater detail will

• A)require more monitoring.
• B)increase the effect of misclassifying some costs and activities.
• C)cause fewer variances.
• D)enable all costs to be unit-costs.

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Definitions:

Total Overhead Cost

The sum of all indirect costs incurred by a business in the production process, which are not directly tied to a specific product or service.

Maintenance Cost

The financial outlay required to maintain assets in efficient working condition over their useful life.

Committed Fixed Cost

Long-term fixed costs that a business incurs, such as lease agreements or long-term contracts with suppliers, which are not easily altered in the short term.

Property Taxes

Taxes assessed on real estate by a local government, based on the property's value, and used to fund public services.