Which of the following is false when using ABC in a service industry? analyze operations accumulated overhead costs by activity cost pools identify activities identify and use cost drivers to assign the cost pools to products

Which of the following is false when using ABC in a service industry? analyze operations accumulated overhead costs by activity cost pools identify activities identify and use cost drivers to assign the cost pools to products

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

Which of the following is false when using ABC in a service industry?

analyze operations

accumulated overhead costs by activity cost pools

identify activities

identify and use cost drivers to assign the cost pools to products

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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