What May Be Perceived as a Drawback of Using an Activity-Based

question 24

Multiple Choice

What may be perceived as a drawback of using an activity-based costing (ABC) system?

• A)The ABC system may provide more accurate data results.
• B)The ABC system may help to establish a better product mix.
• C)The ABC system may improve management's ability to control total costs.
• D)The ABC may cost more to run and be more complex in nature.

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Definitions:

Income Statement

A financial statement that shows a company's revenues and expenses over a specified period, leading to its net profit or loss.

Net Income

The amount of money left after all expenses, taxes, and costs have been subtracted from total revenue.

Owner's Equity

Represents the residual value of a business's assets after deducting its liabilities, indicating the ownership interest of the business owners.

Balance Sheet

A financial statement that displays a company's financial position at a specific point in time, showing assets, liabilities, and stockholders' equity.