Which of the following is NOT a limitation of activity-based costing?
A) Maintaining an activity-based costing system is more costly than maintaining a traditional direct labour-based costing system.
B) Changing from a traditional direct labour-based costing system to an activity-based costing system changes product margins and other key performance indicators used by managers. Such changes are often resisted by managers.
C) In practice, most managers insist on fully allocating all costs to products, customers, and other costing objects in an activity-based costing system. This results in overstated costs.
D) More accurate product costs may result in increasing the selling prices of some products.

Question

Quizplus · Accepted Answer

Activity-based costing (ABC) aims to provide more accurate product costing by allocating overhead costs based on the actual activities that drive those costs. The assertion that ABC may result in increasing the selling prices of some products is not a limitation of the system itself but a potential outcome based on more accurate cost information.

Which of the Following Is NOT a Limitation of Activity-Based