Activity-based costing has most to offer where:
A) overhead is high and volume driven.
B) overhead is high and non-volume driven.
C) overhead is low and non-volume driven.
D) direct labour is a major proportion of total costs.

Question

Quizplus · Accepted Answer

Activity-based costing is most useful in situations where overhead costs are high and non-volume driven. This is because traditional costing methods often allocate these overhead costs to products or services based on volume, which can lead to misallocation and inaccurate cost information. Activity-based costing, on the other hand, identifies specific activities and the resources required to perform those activities, and then allocates the overhead costs based on the actual consumption of those resources. This more accurately reflects the true cost of each product or service.

Activity-Based Costing Has Most to Offer Where