Select the Incorrect Statement Regarding the Use of Cost Drivers

question 143

Multiple Choice

Select the incorrect statement regarding the use of cost drivers in activity-based costing systems.

• A) ABC uses volume-based and activity-based cost drivers.
• B) Volume-based drivers are most appropriate for costs that are affected by the number of units produced.
• C) ABC's use of multiple cost drivers will produce less accurate unit costs when a company produces many different products that require different types and levels of overhead costs.
• D) An arbitrary cost driver must be selected when allocating facility-level activity costs.

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Definitions:

Orthopedic Unit

A specialized department within a hospital focused on the treatment of patients with skeletal system and associated muscles, joints, and ligaments conditions.

Managed Care

Health care system in which there is administrative control over primary health care services. Redundant facilities and services are eliminated, and costs are reduced. Preventive care and health education are emphasized.

Prevention

The act of stopping something from happening or arising, often referring to measures taken to prevent diseases or accidents.

Illness Care

The management and treatment of a patient suffering from disease or injury.