As a company is determining which costing system they wish to implement, they will have a variety of methods from which to choose including Activity-Based Costing (ABC) and traditional costing. Which of the following would be considered a characteristic of a traditional costing system and not of ABC?
A) Being able to calculate the total cost driver for each activity through estimation
B) Being able to determine the departmental rate that the product or service passes through
C) Being able to serve customers by organizing costs into key activities
D) Being able to use each customer as a means to allocate customer service

Question

Quizplus · Accepted Answer

This question requires considering the implementation of traditional costing and how ABC could specifically affect service-based businesses upon its successful implementation. Choice B is correct as it indicates that they would be able to determine the Manufacturing Overhead (MOH) rate for each department that the product or service passes through, which is a characteristic of traditional costing system other than ABC.

As a Company Is Determining Which Costing System They Wish