If a Firm Uses Activity-Based Costing to Allocate Costs, It

question 5

Multiple Choice

If a firm uses activity-based costing to allocate costs, it must:

• A) Combine costs in appropriate pools.
• B) Select appropriate cost drivers.
• C) Calculate an appropriate rate for each pool.
• D) Allocate costs based on predetermined rates for cost pools.
• E) Perform all of these steps.

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Definitions:

Table

A method for organizing data in rows and columns to facilitate analysis and representation.

Probabilities

A calculation that determines the chances of an event occurring, with values between 0 and 1 to signify probability.

t-Table

A table used in statistics that shows the critical values of the t-distribution, used in hypothesis testing and constructing confidence intervals.

Degrees of Freedom

The number of independent values or quantities that can vary in an analysis without violating any constraints.