Is the following statement true or false? Why?

"Department indirect-cost rates are never activity-cost rates."

A) False, department indirect-cost rates are similar to activity-cost rates if significant cost are incurred on different activities within a department but each activity has the same cost-allocation base.

B) False. Department indirect-cost rates are similar to activity-cost rates if a single activity accounts for a sizeable fraction of the department's costs.

C) False. Department indirect-cost rates are similar to activity-cost rates if significant costs are incurred on different activities with different cost allocation bases within a department but different products use resources from the different activity areas in the same proportions.

D) All of the Above

E) None of the above. The statement is true. Each department covers a broad range of activities where activity-based costing systems focus on specific activities. Therefore, department indirect cost rates can never be activity-cost rates.

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D A... View the full answer