4 AN ACTIVITY BASE IS A MEASURE OF WHAT-AS ADVERTISING, RESEARCH, AN...

5- - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH05 COST BEHAIVIOR ANALYSSIS AND USE
SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH05 COST BEHAIVIOR ANALYSSIS AND USE

5-4

An activity base is a measure of what-

as advertising, research, and management de-

ever causes the incurrence of a variable cost.

velopment. A committed fixed cost has a long

Examples of activity bases include units pro-

planning horizon—generally many years. Such

duced, units sold, letters typed, beds in a hospi-

costs relate to a company’s investment in facili-

tal, meals served in a cafe, service calls made,

ties, equipment, and basic organization. Once

etc.

such costs have been incurred, a company be-

comes “locked in” for many years.