Which of the following statements is TRUE regarding activity-based costing systems?
A)ABC systems accumulate overhead costs by departments.
B)ABC costing systems are less complex and, therefore, less costly than traditional systems.
C)ABC costing systems can be used in manufacturing firms only.
D)ABC costing systems have multiple indirect cost allocation rates for each activity.
E)ABC systems provide a greater level of detail to understand how an organization uses its common inputs differently for distinct products.

Question

Quizplus · Accepted Answer

Activity-based costing systems provide a greater level of detail to understand how an organization uses its common inputs differently for distinct products. This allows for more accurate cost allocation and better decision making. ABC systems do not necessarily accumulate overhead costs by departments (A). While ABC systems may initially be more complex to implement, they can ultimately lead to cost savings (B). ABC systems can be used in a variety of settings, not just manufacturing firms (C). Finally, ABC systems do have multiple indirect cost allocation rates for each activity (D).

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