An Activity-Based Costing System That Is Designed for Internal Decision-Making

question 67

Multiple Choice

An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because:

• A)some manufacturing costs (i.e., the costs of idle capacity and organisation-sustaining costs) will not be assigned to products
• B)some non-manufacturing costs are assigned to products.
• C)first-stage allocations may be based on subjective interview data.
• D)all of the above are reasons why an activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles.

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Definitions:

Effective Tax Rate

The average rate at which an individual or corporation is taxed, considering all forms of taxes.

Investment Account

An account held at a financial institution that holds investments such as stocks, bonds, mutual funds, and other assets for the benefit of the investor.

Intercompany Profit

Profits that arise from transactions between companies within the same corporate group, which could distort the true financial position if not eliminated in consolidated financial statements.

Gross Margin

A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage.