Activity-Based-Costing (ABC)charges Products for the Cost of Capacity Used,NOT for Idle

question 124

Essay

Activity-based-costing (ABC)charges products for the cost of capacity used,NOT for idle capacity.
Required:
a)The use of which activity level,budgeted (same as expected)or maximum capacity,is consistent with ABC? Explain.
b)How might the use of ABC based on maximum capacity activity level enhance a firm's ability to compete on price? Explain.

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Definitions:

Gross Domestic Product Per Capita

A measure of a country's economic output that accounts for its number of people, reflecting the average income of a country's citizens.

Capital

A resource that can serve to generate wealth, such as factories, equipment, investment accounts, software, land, and education.

Gross Domestic Product Per Capita

A measure of a country's economic output that accounts for its number of people, essentially the average economic output per person.

Net National Income Per Capita

A measure that represents the total income of a nation divided by its population, indicating the average income per person.