Which of the following statements is TRUE of costing systems?
A) Many traditional costing systems can distort product costs and profitability.
B) Traditional costing systems tend to be more costly than activity-based costing systems.
C) Activity-based costing systems tend to combine various costs into a single cost pool.
D) Activity-based costing systems tend to use fewer cost pools than does a traditional costing system.

Question

Quizplus · Accepted Answer

Many traditional costing systems use only direct labor or machine hours to allocate overhead costs to products, which can lead to distortions in product costs and profitability. Activity-based costing systems allocate costs based on the activities that drive them, resulting in more accurate product costs. B and D are incorrect statements, and C is incorrect as activity-based costing systems tend to use multiple cost pools for greater accuracy.

Which of the Following Statements Is TRUE of Costing Systems