An Activity-Based Cost System

question 5

Multiple Choice

An activity-based cost system

• A)differs from a traditional-based cost system in the nature and number of the cost drivers used.
• B)uses both unit-based and nonunit-based cost drivers that reflect a cause-and-effect relationship.
• C)can trace cost accurately to cost objects other than products.
• D)does all of the above.

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Definitions:

Nontrade Receivables

Monies owed to a company that are not related to the sale of goods or services, such as loans to employees.

Loans

Loans refer to borrowed money that must be repaid with interest by the borrower to the lender, used typically for personal, business, or education purposes.

Allowance for Doubtful Accounts

A contra-asset account that reduces total accounts receivable to reflect the estimated amount of credit sales that may not be collected.

Credit Balance

A positive balance within an account, indicating that a company or individual has received more in deposits than it has spent.