If a company has a great deal of product diversity, activity-based costing will generally yield less accurate product costs than traditional methods based on direct labor or machine hours.

Question

Quizplus · Accepted Answer

Activity-based costing is designed to provide more accurate product costs in cases of product diversity by allocating overhead more precisely based on activities that drive costs, rather than using broad averages like direct labor or machine hours.

If a Company Has a Great Deal of Product Diversity