Consider the following statements. Activity-based costing is more difficult in a service business because:
i. service businesses have a low proportion of overhead in their total costs.
ii. service businesses tend to have a higher level of facility costs than most manufacturers.
iii. it is often difficult to identify service activities because they are non-repetitive.
Which of the above statements is true?
A) i
B) ii
C) ii and iii
D) i, ii and iii

Question

Quizplus · Accepted Answer

Statement ii is true as service businesses often require specialized facilities to deliver their services. Statement iii is also true as service activities can be unique and not easily identifiable for costing purposes. Statement i is false as service businesses can have a significant proportion of overhead costs, especially related to staffing and training.

Consider the Following Statements