Unit Costs Can Be Significantly Different When Using Activity-Based Costing

question 9

True/False

Unit costs can be significantly different when using activity-based costing compared to traditional cost allocation methods.

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Definitions:

Straight-Line

A method of calculating depreciation of an asset, whereby its cost is evenly spread over its useful life.

Cash Payback Period

The time it takes for a business to recover its investment in a project solely from cash flows, used to assess the risk or attractiveness of an investment.

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life, reflecting the consumption of the asset.

Cash Payback Period

The duration required for an investment to generate cash flows sufficient to recover the initial cost of the investment.