As ABC Systems Get Very Detailed and More Cost Pools

question 135

True/False

As ABC systems get very detailed and more cost pools are created, more allocations are necessary to calculate activity costs for each cost pool, which increases the chances of misidentifying the costs of different activity cost pools.

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Definitions:

Large-Scale Business

A business that operates on a large scale, often involving extensive operations, significant capital, numerous employees, and a wide geographical reach.

Law of Diminishing Returns

A principle stating that if one factor of production is increased while others remain constant, the overall returns will eventually decrease after a certain point.

Marginal Cost Curves

Graphs that show how the cost of producing one additional unit changes as the production volume increases.

Variable Costs

Costs that change in proportion to the level of output or activity, such as raw materials, labor, and utilities.