Activity-based costing (ABC)systems allocate overhead differently than traditional cost accounting systems.The difference between an ABC and a traditional cost accounting system is that
A) traditional systems calculate several overhead rates, one for each manufacturing activity.
B) an ABC system uses a single allocation overhead rate.
C) ABC systems calculate several overhead rates, one for each manufacturing activity.
D) a traditional cost accounting system uses two overhead allocation rates: one for actual activity and one for estimates (or standards).

Question

Quizplus · Accepted Answer

ABC systems calculate several overhead rates, one for each manufacturing activity. This allows for more accurate allocation of overhead costs to products or services by identifying the specific activities that consume resources. Traditional cost accounting systems typically use a single overhead allocation rate, which can result in distorted cost information for products or services that are more or less complex than the average.

Activity-Based Costing (ABC)systems Allocate Overhead Differently Than Traditional Cost Accounting