What is an advantage of activity-based costing compared to traditional costing?
A)it is cheaper to implement.
B)overhead allocation is objective rather than arbitrary.
C)linking overheads to cost drivers results in a fairer and more accurate costing.
D)all of the above are advantages.

Question

Quizplus · Accepted Answer

Activity-based costing allows for overhead costs to be linked to specific cost drivers, resulting in a more accurate allocation of costs compared to traditional costing methods. This approach is fairer and allows for better decision making based on the true cost of products or services. Option A is incorrect, as activity-based costing may be more costly to implement initially. Option B is partially correct, as activity-based costing does offer objective overhead allocation but not at the expense of being arbitrarily determined. Option D is incorrect, as option A is not a true advantage.

What Is an Advantage of Activity-Based Costing Compared to Traditional