An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because:
A) under activity-based costing some manufacturing costs (i.e., the costs of idle capacity and organization-sustaining costs) will not be assigned to products.
B) under activity-based costing the sum of all product costs does not equal the total costs of the company.
C) activity-based costing has not been approved by the United Nation's International Accounting Board.
D) activity-based costing results in less accurate costs than more traditional costing methods based on direct labor-hours or machine-hours.

Question

Quizplus · Accepted Answer

An activity-based costing system that is designed for internal decision-making may not assign all manufacturing costs (such as the costs of idle capacity and organization-sustaining costs) to products as they may not directly relate to the production process. This may not conform to generally accepted accounting principles which require all costs to be assigned to products.

An Activity-Based Costing System That Is Designed for Internal Decision-Making