Cost Accounting Quiz
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PROFESSIONAL JUDGMENT AND ETHICS
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ServiceTech provides IT support services and uses an activity-based costing system to price client contracts. The company tracks costs in four activity pools: Help Desk Support, On-Site Service, Project Management, and Training. Account managers are compensated with base salary plus commission based on contract profitability margins. The company's standard contract terms allow for quarterly price adjustments based on actual cost experience, with detailed cost reports provided to clients. Account managers have some discretion over the timing of training activities and project management tasks.
Under this compensation and pricing structure, which behavior by account managers would most clearly constitute cost distortion that undermines the integrity of the activity-based costing system?
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