Which of the following statements is true of activity-based costing?
A) There is a clear cause-and-effect relationship between costs and the cost driver in the long run.
B) There is no variety of cost drivers and cost pools.
C) The system focuses on activities in together and not on individual activities.
D) A single cost driver should be identified for all the activities.

Question

Quizplus · Accepted Answer

Activity-based costing relies on identifying cost drivers, which are the activities that cause costs to be incurred. In the long run, these cost drivers will have a clear cause-and-effect relationship with the costs incurred.

Options B, C, and D are incorrect because activity-based costing involves identifying a variety of cost drivers and cost pools, focusing on individual activities as well as their interactions, and using different cost drivers for different activities.

Which of the Following Statements Is True of Activity-Based Costing