Asked by Rukhna Chaudhry on Jul 28, 2024
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When activity-based costing is used for internal decision-making, the costs of idle capacity should be assigned to products.
Idle Capacity
Unused or underutilized production capacity within a manufacturing operation, often leading to increased costs without corresponding revenue.
Activity-Based Costing
A method of accounting that identifies the activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.
Internal Decision-Making
The process within an organization by which decisions are made by its members or systems based on internal criteria, policies, and data.
- Understand the role of activity rates in the second-stage allocation and their application to products and customers.
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Learning Objectives
- Understand the role of activity rates in the second-stage allocation and their application to products and customers.
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