In an Approximately Relevant ABC System

question 202

Multiple Choice

In an approximately relevant ABC system

• A)all activities still are separated into pools; they are allocated on estimated activity levels.
• B)only the most expensive activities are allocated using appropriate cause-and-effect drivers.
• C)cost pools are limited to only two cost pools.
• D)none of these.

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Definitions:

Total Cost

The total cost is the sum of fixed and variable costs incurred in the production of goods or services.

Economic Profit

The difference between total revenue and the total costs of inputs, including both explicit and implicit costs.

Normal Profit

The minimum profit necessary for a company to remain competitive in the market, essentially covering its opportunity costs.

Competitive Firm

A company that operates in a market where there are many buyers and sellers, and no single entity can control the market price of goods or services.