Which of the Following Statements Is True of ABC Systems

question 113

Multiple Choice

Which of the following statements is true of ABC systems?

• A) ABC systems provide less insight than traditional systems into the management of the indirect costs.
• B) ABC systems are used by managers for strategic decisions rather than for inventory valuation in merchandising companies.
• C) Service companies find great value from ABC because a vast majority of their cost structure is composed of direct costs.
• D) ABC systems is valuable for pricing decisions but not for understanding, managing, and reducing costs in government institutions.

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Definitions:

Warranty Costs

Expenses incurred by a company for repairing or replacing products under warranty.

Interest Expense

Interest expense refers to the charges a business incurs over time for borrowing money.

Income Taxes Expense

The amount of money a company or individual owes to the government based on their taxable income.

Times Interest Earned Ratio

A financial metric that measures a company's ability to meet its debt obligations by comparing its interest expenses to its earnings before interest and taxes (EBIT).