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 separate indirect cost allocation rates for each activity.

Question

Quizplus · Accepted Answer

ABC costing systems have separate indirect cost allocation rates for each activity. This is because the aim of ABC systems is to allocate indirect costs to products or services based on the activities required to produce them, and different activities have different cost drivers. ABC systems are not limited to manufacturing firms and can be used in service firms as well. While ABC systems can provide more accurate costing information, they may be more complex and costly to implement compared to traditional costing systems.

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