For service organizations that bill customers at a predetermined average cost rate,activity-based cost systems can help to:
A)clarify appropriate cost assignments for various service activities.
B)identify the profitability of various service activities.
C)clarify appropriate cost assignments and identify the profitability of various service activities.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

Activity-based cost systems can help service organizations to clarify the appropriate cost assignments for various service activities and also identify the profitability of each activity. This means that the organization can determine which activities are costing more than they should be and which ones are generating revenue. Therefore, option C, which combines both, is the best choice. Option A only addresses one aspect of the benefits, while option B addresses the other. Option D is not correct because activity-based cost systems are designed to provide these benefits to service organizations.

For Service Organizations That Bill Customers at a Predetermined Average