Which of the following statements is CORRECT regarding activity-based costing systems?
A) They have separate indirect cost allocation rates for each activity.
B) They are not as accurate or precise as traditional costing systems.
C) They accumulate overhead costs by processing departments.
D) They are less complex and, therefore, less costly than traditional systems.

Question

Quizplus · Accepted Answer

Activity-based costing systems allocate indirect costs to specific activities, rather than using a single plantwide rate as traditional costing systems do. This allows for a more accurate and precise allocation of costs to products or services. Option B is incorrect as activity-based costing systems are generally considered more accurate than traditional systems. Option C is incorrect as activity-based costing systems do not allocate overhead costs by processing departments, but rather by activity. Option D is also incorrect as activity-based costing systems are typically more complex and costly to implement than traditional systems.

Which of the Following Statements Is CORRECT Regarding Activity-Based Costing