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 greater detail to understand how an organization uses its common inputs differently for distinct products. They do not accumulate overhead costs by departments but rather by activities, and they are generally more complex and costly than traditional costing systems. ABC costing systems can be used in both manufacturing and service firms, and they have multiple indirect cost allocation rates for each activity.

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