An important assumption in using ABC is that
A) production must take place on a continuous basis.
B) all costs in an activity should respond proportionately to changes in the activity level of the cost driver.
C) production must take place on a just-in-time basis.
D) all costs are pushed through each process when customer orders are received.

Question

Quizplus · Accepted Answer

ABC assumes that all costs in an activity should respond proportionately to changes in the activity level of the cost driver. This means that costs cannot be assumed to be fixed or variable based solely on their behavior in the past, but instead must be analyzed in relation to the underlying activity that drives them. The other options (A, C, and D) are not accurate assumptions in using ABC.

An Important Assumption in Using ABC Is That