ABC and LA assign overhead in as correct a way as possible to make each product or service reflect its true cost to the company so that it is possible to determine its true contribution to company profits.

Question

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Activity-Based Costing (ABC) and Labor Allocation (LA) aim to allocate overhead costs based on the activities that create them and the labor required to produce products or services. This allows for a more accurate reflection of the true cost of each product or service, and helps determine its contribution to overall company profits.

ABC and LA Assign Overhead in as Correct a Way