Which of the following reasons explain why ABC concepts may be of great value to service companies?
A) It allows for more accurate cost accounting for inventory
B) It promotes more accurate cost of goods sold reporting
C) It helps make financial reporting more accurate
D) A significant portion of the cost structure of a service firm is composed of indirect costs

Question

Quizplus · Accepted Answer

ABC concepts are particularly useful for service companies because they often have a high proportion of indirect costs in their cost structure. By accurately allocating these costs to specific products or services, service companies can better understand their true costs and make more informed business decisions. ABC can also help improve financial reporting by providing more accurate information about the cost of providing certain services. However, it is not directly related to cost accounting for inventory or cost of goods sold reporting, which are more relevant for manufacturing companies.

Which of the Following Reasons Explain Why ABC Concepts May