When Managers Use ABC Cost Allocation Rates for Decision Making

question 124

Multiple Choice

When managers use ABC cost allocation rates for decision making without distinguishing between flexible and committed costs, their estimates of incremental costs are biased upward or downward. If activity levels are steadily increasing over time, this bias would provide:

• A) Information that overstates costs
• B) Information that understates costs
• C) Accurate information
• D) Reliable information

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Definitions:

Biological Perspective

An approach in psychology and other sciences that examines processes and phenomena in terms of biology, genetics, and evolutionary factors.

Genetic Perspective

A viewpoint emphasizing the role that genetics play in the development and behavior of organisms.

Psychological Perspective

A viewpoint in psychology that emphasizes understanding human behavior by looking at mental functions and psychological processes.

Attachment

An emotional bond that typically forms between infants and their caregivers, influencing patterns of interpersonal relationships.