Asked by Collin Shaffer on Jun 07, 2024
Verified
Under an activity-based system where budgeted costs have been used, it is necessary to include the cost of unused capacity, when estimating and reporting profit.
Unused Capacity
Refers to the resources or capabilities within a business that are not currently being used to their full potential, which can lead to inefficiencies or lost income.
Activity-based System
An activity-based system is a method of assigning costs to products or services based on the activities that go into producing them, aiming to provide more accurate cost information.
- Acquire knowledge about the core ideas of ABC, particularly the roles played by resource drivers and activity drivers.
Verified Answer
MB
michelle batemanJun 09, 2024
Final Answer :
True
Explanation :
In an activity-based system, the cost of unused capacity is a fixed overhead cost and needs to be included in the cost of goods sold. This is necessary for accurate estimation and reporting of profit under the activity-based system.
Learning Objectives
- Acquire knowledge about the core ideas of ABC, particularly the roles played by resource drivers and activity drivers.