An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because:
A)some manufacturing costs (i.e., the costs of idle capacity and organisation-sustaining costs) will not be assigned to products
B)some non-manufacturing costs are assigned to products.
C)first-stage allocations may be based on subjective interview data.
D)all of the above are reasons why an activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles.

Question

Quizplus · Accepted Answer

An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because it may not assign all manufacturing costs (i.e., the costs of idle capacity and organisation-sustaining costs) to products, may assign some non-manufacturing costs to products, and may use subjective interview data in the first-stage allocations. As a result, the system may not meet the requirements of GAAP, which aim to ensure consistency, comparability, and accuracy in financial reporting. However, this does not mean that the system is not useful for internal decision-making, as it can provide more accurate and relevant information about the true costs of products and activities than traditional costing methods.

An Activity-Based Costing System That Is Designed for Internal Decision-Making