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 account separately for product and period costs.

Question

Quizplus · Accepted Answer

Activity-based costing is best used for firms that manufacture multiple product lines as it allows for a more accurate allocation of indirect costs to each product line based on the activities involved in producing them. This is because such firms often have diverse production processes, which make it hard to assign overhead costs simply. Activity-based costing identifies individual cost drivers for each product, allowing them to distribute costs based on each product's unique production process.

The Use of Activity-Based Costing Is Most Appropriate For