If a Firm Uses Activity-Based Costing to Allocate Costs, It

question 28

Multiple Choice

If a firm uses activity-based costing to allocate costs, it does all but which of the following?

• A) Combine homogeneous costs in appropriate pools.
• B) Calculate an appropriate rate for each pool.
• C) Select appropriate cost drivers.
• D) Apply a volume-related measure per unit of product.
• E) Allocate costs based on predetermined rates for cost pools.

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Definitions:

Initial Investments

The sum of money used to start a business venture, purchase capital assets, or invest in a project.

Income Taxes

Government levies on the earnings of individuals and companies within their territory.

After-Tax Discount Rate

The discount rate used in investment or project valuation that accounts for the effects of taxes on the project's cash flows.

Straight-Line Depreciation

A method of allocating an asset's cost evenly over its useful life.