Which of the Following Transactions Is Represented by the Diagram

question 9

Multiple Choice

Which of the following transactions is represented by the diagram below?

• A) Vendors send a bill for each inventory item purchased which is payable on receipt.
• B) A single purchase of inventory is paid for with multiple payments.
• C) Inventory vendors send a monthly bill for merchandise delivered. The seller does not accept or allow installment payments.
• D) Some inventory purchases are paid for with multiple payments and some payments may apply to multiple purchases.

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Definitions:

Allocation Base

A measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects.

Activity Cost Pool

A “bucket” in which costs are accumulated that relate to a single activity measure in an activity-based costing system.

Activity Measure

An activity measure is a metric used in activity-based costing to gauge the amount of activity consumed by a cost object, assisting in the more accurate allotment of overhead costs.

Traditional Cost System

A costing method that allocates overhead costs based on a single volume-based cost driver, such as labor hours or machine hours.