Question
Asked Mar 26, 2019
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Which of the following is not a reason for banks to use activity-based costing?
a.to determine service quality
b.to determine profitability of services provided
c.to determine the amounts charged to customers for services provided
d.All of these choices are correct.
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Expert Answer

Step 1

Activity based costing (ABC): Under activity based costing method, the activities responsible for manufacturing a product are identified by the system. The costs are allocated to the products based on the activities. The costs are grouped based on the activities, and are referred to as cost pools. Activity rate is the rate that is estimated to allocate cost to the products based on the activities or resources by selecting the activity base for each activity.

Step 2

Banks are service-based organizations. Banks provide services like raising funds, providing loans, customer support, product or service support. Banks can apply ABC to determine the profitability of these services, and the cha...

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Accounting

Activity Based Costing

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