Which of the following statement(s)regarding activity-based costing is (are)true? I.Use of activity-based costing improves cost tracing by using more cause-and-effect relationships to assign indirect costs to activity centers.
II)An activity-based system is characterized by multiple cost pools and multiple volume and activity cost drivers.
III)Activity-based costing can cause distortion of cost,assigning too much cost to some products and too little to others.
A) I and III
B) I and II
C) II and III
D) III only

Question

Quizplus · Accepted Answer

Statement I is true because activity-based costing does improve cost tracing by using more cause-and-effect relationships to assign indirect costs to activity centers. Statement II is also true because an activity-based system is characterized by multiple cost pools and multiple volume and activity cost drivers. Statement III is false because activity-based costing is designed to reduce cost distortion by assigning indirect costs based on activities and their causal relationships to products or services. Therefore, only options B is correct.

Which of the Following Statement(s)regarding Activity-Based Costing Is (Are)true? I