Which of the Following Would Be a Likely Disadvantage of Activity-Based

question 25

Multiple Choice

Which of the following would be a likely disadvantage of activity-based costing (ABC) ?

• A) A decrease in a company's ability to accurately prepare budgets for the upcoming period.
• B) A decrease in a company's ability to find opportunities for continuous improvement.
• C) An increase in the accuracy of product cost information.
• D) An increase in the cost of obtaining accurate product cost information.

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Definitions:

Cost Equation

An equation used to estimate costs, typically in the form of fixed costs plus variable costs times the number of units.

Variable Costs

Expenses that vary directly with the level of production or sales volume, such as materials and labor.

Pretax Income

The income that a company earns before any taxes are deducted, representing the profitability of the company before government intervention.

Break-even Point

The level of production or sales at which total costs equal total revenues, resulting in no profit or loss.