For Which One of the Following Reasons Is the Calculation

question 109

Multiple Choice

For which one of the following reasons is the calculation of overhead variances in conjunction with an activity-based cost (ABC) system desirable from the standpoint of management?

• A) The resulting cost-management system is currently required by generally accepted accounting principles (GAAP).
• B) Such a system would be consistent with the goal of managing activities rather than cost.
• C) Such a system is likely to be less costly to design and implement.
• D) Far fewer variances would likely be expected under such a system.
• E) Conventional systems, though appropriate for a manufacturing setting, are not applicable to the service sector.

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Definitions:

General Partner

A full partner with unlimited liability for the debts of the partnership.

Limited Partnership

A partnership consisting of at least one general partner, who manages the business and is personally liable for debts, and one or more limited partners, who invest but do not participate in management.

Partnership Interest

The share or portion of a partnership owned by one of the partners, including rights to its profits.

Capacity at Law

The ability of an entity or individual to enter into legally binding contracts and to sue or be sued.