To Guide Cost Allocation Decisions, the Ability to Bear Criterion

question 70

Multiple Choice

To guide cost allocation decisions, the ability to bear criterion ________.

• A) is the primary criterion used in activity-based costing
• B) allocates cost among the beneficiaries in proportion to the benefits each receives.
• C) results in subsidizing products that are not profitable
• D) is used more frequently than any other criteria

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Definitions:

Benefits-Received Principle

A tax theory stating that those who benefit from government services should pay taxes in proportion to the amount of benefits they receive.

Government Expenditures

The total amount spent by the government on goods, services, and public projects.

Households

Economic entities (of one or more persons occupying a housing unit) that provide resources to the economy and use the income received to purchase goods and services that satisfy economic wants.

Top Quintile

Refers to the highest fifth or 20% segment of a population or group sorted by a particular metric, often used in the context of income distribution.