An Activity-Based Cost Allocation System

question 35

Multiple Choice

An activity-based cost allocation system:

• A) Traces costs to products on the basis of activities performed on them.
• B) Does not involve the level of detail and the number of allocations that companies make with traditional allocation methods.
• C) Does not provide total unit cost data.
• D) Does not provide for the allocation of any cost to products that cannot be directly traced to those products.
• E) Is one form of a direct or variable costing system.

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Definitions:

Income

The money received by an individual or organization for work, goods, or investments, typically measured over a period of time, such as monthly or annually.

Utility Function

A representation in economic theory that quantifies the satisfaction a user obtains from consuming various bundles of goods and services.

Flood

An overflow of a large amount of water beyond its normal limits, especially over what is normally dry land.

Insurance

A financial product designed to protect against the risk of financial losses, both big and small, that result from damage to the insured or property, or liability for damage or injury caused to a third party.