The accounts department investigates all applications from new customers for credit sales. It has incurred a cost of 2,500 in January to investigate 100 customer applications. The accounts department has apportioned the cost as 1,250 each to division A and B because each has the same level of sales. The manger of division A has claimed that this is unfair because she only asked for 20 investigations while division B asked for 80 investigations.
Which of the following statements is correct?
(i) Activity based costing would charge 500 to division A and 2,000 to division B.
(ii) Activity based costing forecasts that the customer investigation costs for February will be 500 for division A and 2,000 for division B. (iii) Activity based costing makes managers more aware of the cost incurred by their operations.
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