Which of the following statements about activity-based costing is TRUE?
A) It does not affect cost control.
B) Indirect cost allocation bases are unlikely to be cost drivers.
C) It provides less information than traditional cost systems.
D) It provides similar results to traditional costing when one activity creates a substantial amount of total cost.
E) It provides similar results to traditional costing when different products use resources from different activities in different proportions.

Question

Quizplus · Accepted Answer

Activity-based costing (ABC) can provide similar results to traditional costing methods when one activity is responsible for a substantial portion of the total cost. This is because both costing methods would allocate a significant amount of costs based on that dominant activity, leading to similar cost figures for products or services. However, ABC differs significantly in scenarios where multiple activities drive costs, especially when those activities affect products in different ways.

Which of the Following Statements About Activity-Based Costing Is TRUE