Activities consume resources. In activity-based costing an attempt is made to trace the costs of those activities directly to the products that cause them.

Question

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Activity-based costing (ABC) is a costing method that identifies activities in an organization and assigns the cost of each activity to products and services based on their actual consumption of resources. ABC aims to provide a more accurate estimation of the cost of a product/service by directly linking the cost of each activity to the product that caused it. Therefore, the statement that activities consume resources and the attempt is made to trace the costs of those activities directly to the products that cause them is true.

Activities Consume Resources