Practical Capacity Is Used as the Numerator for Activity Cost

question 41

True/False

Practical capacity is used as the numerator for activity cost driver calculations to avoid distortions caused by the assignment of excess capacity costs to the products.

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Definitions:

Availability Heuristic

A mental shortcut that relies on immediate examples that come to mind when evaluating a specific topic, concept, method, or decision.

Lottery Jackpot

The largest prize available in a lottery, often accumulating until it is won.

Infinitesimal Odds

Extremely small chances or probabilities of a specific event occurring.

Framing Effects

In prospect theory, changes in people’s decision making caused by new information that alters the context, or “frame of reference,” that they use to judge whether options are viewed as gains or losses relative to the status quo.