Which of the Following Is Not a Limitation of Activity-Based

question 29

Multiple Choice

Which of the following is not a limitation of activity-based costing?

• A) More accurate product costs may result in increasing the selling prices of some products.
• B) Complex products are assigned a larger portion of overhead.
• C) Changing from a traditional direct labor-based costing system to an activity-based costing system changes product margins and other key performance indicators used by managers. Such changes are often resisted by managers.
• D) Maintaining an activity-based costing system is more costly than maintaining a traditional direct labor-based costing system.
• E) In practice, most managers insist on fully allocating all costs to products, customers, and other costing objects in an activity-based costing system. This results in overstated costs.

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Definitions:

Personal/Rental Property

Personal/rental property refers to property owned by an individual that can be used for personal use or rented out, affecting tax treatments and deductions.

Schedule A

A form used in the US tax system for itemizing allowable deductions against income, such as medical expenses, taxes paid, and charitable contributions.

Personal/Rental Property

Property that can be used for personal purposes or rented out to generate income, impacting the treatment of expenses and income for tax purposes.

Passive Activities

Economic activities or investments in which the investor does not materially participate, often subject to different tax rules.