The Proper Treatment of the Cost of Unused Capacity, as Identified

question 110

Multiple Choice

The proper treatment of the cost of unused capacity, as identified through the use of an activity-based budgeting (ABB) system, is to charge the amount to:

• A) Customers whose uneven orders caused the unused capacity.
• B) A "deferred asset" account on the balance sheet.
• C) A "deferred credit" account on the balance sheet.
• D) All products produced during the area (via overhead application rates).
• E) The product line, department, or a given manager within the organization where the decision to acquire the capacity was made.

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Definitions:

Amazon

A global technology company focused on e-commerce, cloud computing, digital streaming, and artificial intelligence.

Average Order Size

The mean quantity of goods ordered in a single transaction or over a set period of time.

Gasoline Purchases

The acquisition of fuel for vehicles, typically involving transactions at gas stations.

Absentee Landlord

A property owner who does not live on-site and rarely, if ever, visits the property, often relying on management companies for maintenance.