Activity-Based Costing Is Most Likely to Yield Benefits for Companies

question 52

Multiple Choice

Activity-based costing is most likely to yield benefits for companies with all of the following characteristics EXCEPT:

• A)a highly competitive environment,where cost control is critical.
• B)numerous products that consume different amounts of resources.
• C)operations that remain fairly consistent.
• D)accessible accounting and information systems expertise to maintain the system.

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Definitions:

Working Capital Assets

Current assets that are used in the operation of a business and can be converted into cash within a year.

Net Working Capital

The difference between a company's current assets and its current liabilities, indicating the short-term financial health and operational efficiency.

Spontaneous Financing

Financing that occurs naturally as a company operates, such as trade credit that increases as sales increase.

Working Capital Accounts

Accounts that reflect a company's current assets minus its current liabilities, providing a snapshot of its short-term financial health and operational efficiency.