When a Company Is Considering the Possibility of Processing Their

question 132

True/False

When a company is considering the possibility of processing their product further to achieve higher sales revenues, the rule is as follows: as long as the additional processing generates higher sales revenues, it is the preferred alternative.

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Definitions:

Cost Driver

A cost driver is a factor that causes or influences the cost of certain activities, products, or services, varying in direct proportion to the level of activity or volume.

Cost Object

A cost object is any item for which costs are separately measured and tracked, such as products, projects, or departments.

Denominator Volume

The activity level used to allocate fixed costs to products or services, affecting the calculation of unit costs.

Budgeted Capacity

The amount of production or activity level planned for a future period, based on budget allocations.