Activity-Based Cost Accounting Aims at

question 14

Multiple Choice

Activity-based cost accounting aims at

• A) making cross-company comparisons of the costs of each value chain activity.
• B) dividing all company expenses into two categories: activities whose costs are variable and activities whose costs are fixed.
• C) determining the costs of each activity comprising a company's value chain by establishing expense categories for specific value chain activities and assigning costs to the activity responsible for creating the cost.
• D) determining the costs of each strategic action a company initiates.
• E) None of these accurately describes what activity-based costing is about.

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Definitions:

Monthly Payments

Regular payments made once a month, commonly in the context of loans, rent, or other agreements.

Present Value

The present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return.

Annuity

A financial instrument providing a steady series of payments to a person, mainly utilized as a source of income for people in retirement.

Compounded Monthly

The method of calculating interest where the interest earned is added to the principal at the end of each month, leading to interest on interest in subsequent months.