Which of the Following Is True with Activity Based Cost

question 53

Multiple Choice

Which of the following is true with activity based cost accounting?

• A) Activity-based costing ignores the allocation of marketing and distribution costs.
• B) Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products.
• C) The focus is on activities that account for a sizable fraction of indirect costs .
• D) Chances of product-cost cross-subsidization are higher in activity-based costing compared to traditional costing systems.

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Definitions:

Commercial Draft

A written order from one party to another, directing the payment of a specified sum of money to a third party, often used in trade.

Banker's Acceptance

A short-term debt instrument issued by a company but guaranteed by a bank, commonly used in international trade.

Trade Acceptance

A written promise or a draft by one party, the seller, to another, the buyer, to pay a specified sum of money at a future date.

Sight Draft

A financial instrument that is payable on demand when presented to the drawee.