Activity-based costing attempts to identify the most relevant cause-and-effect relationship for each activity pool without restricting the cost driver to only units of output or variables related to units of output.

Question

Quizplus · Accepted Answer

Activity-based costing recognizes that different activities consume different resources, and therefore, different cost drivers may be more appropriate for each activity. This approach allows for a more accurate allocation of indirect costs to products, services or customers. It does not limit the cost driver to units of output or variables related to units of output.

Activity-Based Costing Attempts to Identify the Most Relevant Cause-And-Effect Relationship