Why Is Activity-Based Costing Used to Allocate Service Department Costs

question 30

Multiple Choice

Why is activity-based costing used to allocate service department costs?

• A)To improve allocations of production department costs to production departments.
• B)To improve allocations of production department costs to service departments.
• C)To improve allocations of service department costs to production departments.
• D)None of the answers is correct.

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Definitions:

Price Per Unit

The cost assigned to a single unit of a product or service, used to set selling prices and evaluate production efficiency.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a specific price within a given time period.

Market Growth Rate

The increase in size or value of a market over a specified period, typically expressed as a percentage.

Demand Curve

A graphical representation showing the relationship between the price of a product and the quantity of the product that consumers are willing to purchase.