In general, the risk of measurement error in an ABC system increases when:
A) Costs are traced rather than allocated
B) Managers are uncertain about the relationship between costs and cost pools
C) The number of cost pools decreases
D) A company uses a team approach to systems design

Question

Quizplus · Accepted Answer

When managers are uncertain about the relationship between costs and cost pools, they may make errors in assigning costs to the wrong pool or misinterpret the data, which can result in inaccurate cost allocation. This increases the risk of measurement error in the ABC system. A, C, and D do not necessarily increase measurement error in an ABC system.

In General, the Risk of Measurement Error in an ABC