One of the Advantages of Activity-Based Costing (ABC) Over Traditional

question 7

Multiple Choice

One of the advantages of activity-based costing (ABC) over traditional methods of overhead allocation, when combined with cost-based pricing, is that ABC avoids the problem of:

• A) low-volume products being underpriced.
• B) low-volume products being overpriced.
• C) high-volume products being underpriced.
• D) complex products being overpriced.

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Definitions:

Book Value

The net value of a company's assets minus its liabilities, as recorded on the balance sheet.

Poison Pill

A defensive strategy used by corporations to deter hostile takeovers by making the company less attractive to the potential acquirer.

Control

In a business context, the ability to direct the management and policies of a company, often through the ownership of a majority of shares.

Shareholders

Individuals or entities that own one or more shares of stock in a corporation, thus having partial ownership and interest in the company.