Why Is Overhead Allocation Under ABC Usually More Accurate Than

question 179

Essay

Why is overhead allocation under ABC usually more accurate than either the plantwide overhead allocation method or the departmental overhead allocation method?

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Definitions:

Accounts Payable

Liabilities reflecting money owed by a business to its suppliers or creditors for goods and services purchased on credit.

Creditor

An individual or institution that lends money or extends credit to another entity.

Interim Statements

Financial statements prepared for a period shorter than a financial year, typically quarterly or semi-annually, to provide a more immediate financial status of the company.

Insurance

A financial product that provides protection against financial losses from specified risks, such as accidents, theft, or natural disasters.