A system of assigning costs to departments and products on the basis of a variety of activities instead of only one allocation base is called:
A) A responsibility accounting system.
B) A cost center accounting system.
C) Controllable costing.
D) Activity-based costing.
E) Performance costing.

Question

Quizplus · Accepted Answer

Activity-based costing (ABC) is a system that allocates costs to departments and products based on a variety of activities, rather than just one allocation base. ABC recognizes that the cost of a product or service is a function of the activities required to produce or deliver it. This approach provides a more accurate picture of the true cost of products or services and helps organizations make better decisions about pricing, product mix, and process improvements. The other answer choices are not applicable to the given definition.

A System of Assigning Costs to Departments and Products on the Basis