Which of the Following Is True Regarding Activity-Based Costing (ABC)

question 44

Multiple Choice

Which of the following is true regarding activity-based costing (ABC) ?

• A) The benefits of using ABC always outweigh its limitations.
• B) The lower the proportion of overhead costs as compared to direct materials and direct labor costs, the more likely a company will benefit by using ABC.
• C) Companies with a high-proportion of non-unit-level costs should rarely use ABC.
• D) High measurement costs associated with ABC may deter some companies from its use.

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Definitions:

Preexisting Duty

An obligation that a party is already bound to by law or by some other agreement. The party may not use this as consideration in a new contract.

Promissory Estoppel

A judicial principle that stops one from retracting a pledge given to another if the latter has justifiably depended on the promise to their disadvantage.

Disputed Amounts

Refers to the sums of money under contention between parties in transactions or contracts, often leading to negotiation or legal actions.

Satisfaction

The agreed-to settlement as contained in an accord.