When Activity-Based Costing Is Used, the Flow of Costs Through

question 76

True/False

When activity-based costing is used, the flow of costs through the accounts is similar to a system using one plantwide overhead application rate other than the overhead costs are applied using multiple predetermined overhead rates.

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Definitions:

Overhead Budget

A financial plan estimating the expected indirect costs required to support operational activities within a certain period.

Variable Overhead Costs

Costs that fluctuate with production volume, such as utilities or raw materials.

Service Company

A business that provides non-physical goods or services to customers.

Planning Budget

A budget created for a particular level of activity, used as a tool for decision making and performance evaluation.