Which of the Following Statements Regarding Service Companies and Activity-Based

question 67

Multiple Choice

Which of the following statements regarding service companies and activity-based costing (ABC) is true?

• A) Service companies are not permitted to use ABC costing.
• B) Service companies find it easier to use ABC costing than manufacturing companies.
• C) Fewer repetitive activities make ABC costing more difficult to implement in service companies.
• D) Service companies have proportionately less facility-level costs than manufacturing companies.

---

Definitions:

Revenues Test

A criterion used to assess whether revenues are being recognized in the correct accounting period under the accrual basis of accounting.

Operating Segment

A component of a business that engages in business activities earning revenues and incurring expenses, whose operating results are regularly reviewed by the organization's chief operating decision maker.

Separate Disclosures

Financial reporting that requires specific financial statements or items to be presented separately to provide clarity and detail.

Total Revenues

The sum of money received from selling goods or services which are the main activities of a business.