Which of the Following Statements Is True Regarding the Identification

question 26

Multiple Choice

Which of the following statements is true regarding the identification of activities in an ABC system?

• A) All manufacturing companies have identical types of activities.
• B) All merchandising companies have identical types of activities.
• C) As a business becomes more complex, fewer activities need to be identified.
• D) Two different businesses which have the same type of activities can still choose different cost drivers.

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Definitions:

Net Operating Income

A financial metric that calculates a company's profit after subtracting operating expenses, excluding taxes and interest.

Degree Of Operating Leverage

A measure, at a given level of sales, of how a percentage change in sales volume will affect profits. The degree of operating leverage is computed by dividing contribution margin by net operating income.

Variable Costs

Costs that change in proportion to the level of activity or volume of output produced.

Fixed Costs

Overheads that are unaffected by the quantity of output or sales, for example, tenancy costs, wages for staff, and indemnity expenses.