Select the Incorrect Statement Regarding the Use of Cost Drivers

question 130

Multiple Choice

Select the incorrect statement regarding the use of cost drivers in activity-based costing systems.

• A) ABC uses volume-based and activity-based cost drivers.
• B) Volume-based drivers are most appropriate for costs that are affected by the number of units produced.
• C) ABC's use of multiple cost drivers will produce less precise accurate unit costs when a company produces many different products that require different types and levels of overhead costs.
• D) An arbitrary cost driver must be selected when allocating facility-level activity costs.

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Definitions:

Inventories

Refers to the goods and materials that a business holds for the ultimate goal of resale, production, or utilization in manufacturing.

Domestic Net Worth

Domestic Net Worth calculates the total asset value of a nation's residents, companies, and government less all liabilities and debts within the country.

Trillion

A numerical value represented by 1 followed by 12 zeros, commonly used in discussions of national economies and government budgets.

Fixed-Income Security

A type of investment that pays regular income in the form of interest or dividends, such as bonds or preferred stock.