In Activity Based Costing Systems, Limiting Cost-Allocation Bases to Only

question 95

True/False

In activity based costing systems, limiting cost-allocation bases to only units of output strengthens the cause-and-effect relationship between the cost-allocation base and the costs in a cost pool.

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Definitions:

Support Departments

Units within an organization that provide essential services or support to the production or primary activities departments.

Indirect Costs

Expenses that are not directly traceable to a specific product, project, or activity, often including utilities, rent, and administrative salaries.

Responsibility Centres

Sections or divisions of a business for which a manager has authority and responsibility, typically including revenue, expense, profit, and investment centers.

Seasonal

Relating to or dependent on a particular season or time of year, often affecting businesses, climate, or activities in a cyclical manner.