Product Costs Can Be Distorted If a Unit-Based Activity Driver

question 14

Multiple Choice

Product costs can be distorted if a unit-based activity driver is used and

• A) nonunit-based overhead costs are a significant proportion of total overhead.
• B) the consumption ratios differ between unit-based and nonunit-based input categories.
• C) both a and b.
• D) neither a nor b.

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Definitions:

Net Income

The amount of total revenues that exceed total expenses of a company in a given period, often viewed as "profit" or "earnings."

Initial Value Method

The Initial Value Method is an accounting approach for investments, where the investment is recorded at its cost at the time of purchase without adjusting for changes in market value.

Noncontrolling Interest

The portion of equity (ownership) interest in a subsidiary not attributable to the parent company, reflecting the minority shareholders' share of the subsidiary’s net assets and incomes.

Noncontrolling Interest

A minority stake in a corporation, where the share does not offer control over the company's operations.