The use of which of the following costing systems is most likely to reduce cost distortion to a minimum?
A)Plantwide overhead rate
B)Departmental overhead allocation rates
C)Traditional costing system
D)Activity-based costing

Question

Quizplus · Accepted Answer

Activity-based costing is designed to allocate overhead costs to products based on their actual usage of activities, rather than using broad and potentially inaccurate measures like direct labor hours or machine hours. As a result, ABC is often better at reducing cost distortion and providing more accurate cost information than traditional costing systems, plantwide overhead rates, or departmental allocation rates.

The Use of Which of the Following Costing Systems Is