Costs classified as batch-level costs should depend on the number of batches processed rather than on the number of units produced, the number of units sold, or other measures of volume

Question

Quizplus · Accepted Answer

Activity-based costing (ABC) and traditional costing systems differ in their approach to assigning costs to products or services. Traditional costing systems rely on volume-based allocation methods, such as direct labor hours or machine hours, to distribute overhead costs to products. In contrast, ABC assigns overhead costs based on the activities that drive those costs, which may include batch-level, product-level, or customer-level activities. This allows for a more accurate reflection of the actual cost drivers of products or services, rather than relying solely on volume-based measures. Additionally, ABC provides more detailed information about the specific costs associated with each activity, allowing for better identification of cost-saving opportunities.

Costs Classified as Batch-Level Costs Should Depend on the Number