To Guide Cost Allocation Decisions, the Cause-And-Effect Criterion ________

question 156

Multiple Choice

To guide cost allocation decisions, the cause-and-effect criterion ________.

• A) is used less frequently than the other criteria
• B) is the primary criterion used in activity-based costing
• C) considers fairness as a matter of judgment rather than an operational criterion
• D) advocates allocating costs in proportion to the cost object's ability to bear costs allocated to it

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Definitions:

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, usually represented as the area above the supply curve and below the market price.

Supply Curve

A graphical representation showing the relationship between the price of a good or service and the quantity of that good or service that suppliers are willing to offer for sale, holding all other factors constant.

Demand Curve

A visual chart that shows how the quantity of a product demanded by buyers varies with its price.

Producer Surplus

The variance between the acceptable selling price for producers of a good or service and the real earnings they secure.