Which of the following statements is TRUE regarding activity-based costing systems?
A) ABC systems accumulate overhead costs by departments.
B) ABC costing systems are less complex and, therefore, less costly than traditional systems.
C) ABC costing systems can be used in manufacturing firms only.
D) ABC costing systems have separate indirect cost allocation rates for each activity.

Question

Quizplus · Accepted Answer

One of the main features of ABC systems is that they have separate indirect cost allocation rates for each activity. ABC systems also aim to accumulate overhead costs by activities, not by departments or cost centers, to provide more accurate and relevant cost information for decision-making. While ABC systems are more complex and may be more costly to implement than traditional costing methods, they can be used in various types of organizations, including manufacturing and service industries.

Which of the Following Statements Is TRUE Regarding Activity-Based Costing