The use of activity-based costing is most appropriate for:
A)Firms that manufacture multiple product lines.
B)Firms that have very low manufacturing overhead costs relative to other costs of production.
C)Firms with high levels of production activity.
D)Firms that are labor intensive.
E)Firms that manufacture a small number of different products.

Question

Quizplus · Accepted Answer

Activity-based costing (ABC) is most appropriate for firms that manufacture multiple product lines because it allows for a more accurate allocation of indirect costs to each product line based on the actual activities that drive those costs. This is particularly important when there are different activities required for each product line. ABC can help management understand the cost of producing each product line so that they can make better decisions about pricing, marketing, and process improvement.

The Use of Activity-Based Costing Is Most Appropriate For