Tiny Timber Tree Farms has decided to adopt activity-based costing.Which of the following is one likely reason the firm's accountants decided on this approach?
A)to move from a system that focuses on assigning costs to goods and services to a system that assigns costs to activities
B)to simplify the process of assigning costs to specific products
C)to base costing on the amount of direct labour used to produce each product
D)to provide a more meaningful way to assign overhead costs to specific products

Question

Quizplus · Accepted Answer

Activity-based costing provides a more accurate method for assigning overhead costs to specific products. This is likely the reason why Tiny Timber Tree Farms decided to adopt this approach. It allows for a more precise allocation of costs based on the actual activities involved in the production process, rather than just allocating costs based on a broad average of the whole production process.

Tiny Timber Tree Farms Has Decided to Adopt Activity-Based Costing