In a simple activity-based product costing system:
A) direct material,direct labour,manufacturing overhead and non-manufacturing overhead are assigned to products on an activity basis
B) direct material is traced using a conventional approach,while direct labour,manufacturing overhead and non-manufacturing overhead are assigned to products on an activity basis
C) direct material and direct labour are traced using a conventional approach,manufacturing overhead is assigned on an activity basis and non-manufacturing overhead is expensed as it is incurred
D) direct material,direct labour and manufacturing overhead are traced using a conventional approach,and non-manufacturing overhead is assigned on an activity basis

Question

Quizplus · Accepted Answer

In a simple activity-based product costing system, the direct material and direct labour are traced using a conventional approach, and manufacturing overhead is assigned on an activity basis. Non-manufacturing overhead is expensed as it is incurred because it is not related to production activities. This approach leads to a more accurate product cost calculation as it considers the activities that actually consume resources. Choice A and D assign non-manufacturing overhead on an activity basis, which is not appropriate since it is not related to production activities. Choice B only assigns direct material using a conventional approach which is not sufficient for an activity-based costing system. Therefore, choice C is the best option.

In a Simple Activity-Based Product Costing System