In Both Activity-Based and Time-Driven Activity-Based Systems We Calculate Cost-Driver

In both activity-based and time-driven activity-based systems we calculate cost-driver rates for support activities (e.g., the cost to ship an item or the cost to process a customer order) and it is asserted that these rates are best determined by dividing budgeted resource costs (for a given cost pool) by the practical capacity of resources supplied.
Required:
1.What is the primary advantage of using practical capacity as the volume level for determining cost allocation rates in an ABC or TDABC system?
2.What is the appropriate accounting treatment for unused capacity costs for a given accounting period?

Correct Answer:

Verified

1.Beyond logical consistency (the numera...

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

View Full Answer For Free