The number of activity cost centers used by a company should:
A) equal the number of activities required to produce the product.
B) equal the number of departments it has.
C) equal the number of products it has.
D) be determined on a cost/benefit basis.

Question

Quizplus · Accepted Answer

The number of activity cost centers used by a company should be determined on a cost/benefit basis because having too many cost centers can become too expensive to manage and maintain, while having too few can result in inaccurate allocation of costs. Therefore, it is important for companies to evaluate the costs and benefits of each cost center and determine the optimal number needed for effective cost management.

The Number of Activity Cost Centers Used by a Company