Shubelik Company is changing to an activity-based costing method.They have determined that they will use three cost pools: setups,inspections,and assembly.Which of the following would not be used as the activity base for any of these three activities?
A) number of units to be produced
B) number of setups
C) number of inspections
D) number of direct labor hours

Question

Quizplus · Accepted Answer

The number of units to be produced is not a suitable activity base for setups, inspections, or assembly in activity-based costing. Activity-based costing focuses on activities that consume resources and assigns costs based on those activities. Setups, inspections, and assembly are more directly related to the number of setups, number of inspections, and direct labor hours, respectively, rather than the total number of units produced.

Shubelik Company Is Changing to an Activity-Based Costing Method