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Which of the following is a true statement about activity-based customer costing? a. Customer diversity requires a single driver to trace costs accurately to customers. b. Customers can consume customer-driven activities in different proportions. c. It will rarely result in any changes in a company’s customer mix. d. It will seldom improve profitability.

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

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Chapter
Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 11, Problem 19E
Textbook Problem
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Which of the following is a true statement about activity-based customer costing?

  1. a. Customer diversity requires a single driver to trace costs accurately to customers.
  2. b. Customers can consume customer-driven activities in different proportions.
  3. c. It will rarely result in any changes in a company’s customer mix.
  4. d. It will seldom improve profitability.

To determine

Identify the true statement about activity-based customer costing.

Explanation of Solution

Activity-based customer costing: “Activity-based customer costing” assigns the costs of customer-caused activities to “individual customers or customer types”. Customers can then be grouped as profitable or unprofitable and further steps could be implemented for improving “efficiency and profitability”.

Justification for incorrect option a:

“Customer diversity requires a single driver to trace costs accurately to customers” is an incorrect statement about activity-based customer costing as multiple drivers are required to trace costs precisely to customers.

Justification for incorrect option c:

“It will rarely result in any changes in a company’s customer mix” is an incorrect statement about activity-based customer costing as it changes the customer mix of the company often...

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Chapter 11 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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