Which of the following is true concerning selecting a cost-allocation base in an ABC system?
A) Cost-allocation bases are not relevant in defining the number of activity pools.
B) All costs can be directly identified with a specific activity.
C) The allocation base chosen may be constrained by the availability of reliable data.
D) Costs may need to be allocated to services first, before the costs of services can be allocated to activities.
E) Output unit-level costs cannot be related to a cost-allocation base.

Question

Quizplus · Accepted Answer

The allocation base chosen in an ABC system may be constrained by the availability of reliable data. This means that the choice of allocation base may be influenced by the extent to which data on the underlying activity can be accurately and consistently measured. Option A is incorrect because the choice of cost-allocation base can influence the number of activity pools needed to accurately capture the costs of different activities. Option B is incorrect as not all costs can be directly identified with a specific activity, hence the need to allocate these costs. Option D is incorrect because costs are typically allocated to activity pools first before being further allocated to services. Option E is incorrect because output unit-level costs are typically assigned to specific activities based on the factors that drive these costs.

Which of the Following Is True Concerning Selecting a Cost-Allocation