Consider the Situation Where an Activity-Based Costing System Is in Use

question 64

Multiple Choice

Consider the situation where an activity-based costing system is in use rather than a traditional volume-based costing system. Which of the following statements is/are true?

• A) The relevant cost decision model would be inappropriate if activity-based costing is used.
• B) The relevant cost decision model is still appropriate, but a different decision criterion must be used.
• C) The data collection and analysis step is going to be affected by the use of non-volume-related cost drivers.
• D) The relevant cost decision model would be inappropriate if activity-based costing is used AND the data collection and analysis step is going to be affected by the use of non-volume-related cost drivers.

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Definitions:

Goodwill

An intangible asset that arises when a company acquires another business for more than the fair value of its identifiable net assets, representing expected future benefits from synergies, brand, and customer loyalty.

Investment

An asset or item acquired with the goal of generating income or appreciation in value.

Stockholders' Equity

The portion of a company's capital that belongs to the shareholders, calculated as the company's total assets minus its total liabilities.

Consolidated Statement

Financial statements that combine the accounting information of a parent company with its subsidiaries, presenting it as a single economic entity.