Which of the following statements regarding activity-based costing (ABC) is true?
A) Resources consume activities and products consume costs.
B) Activities consume resources and products consume activities.
C) Costs consume activities and products cause costs.
D) Resources consume activities and activities cause costs.

Question

Quizplus · Accepted Answer

Activity-based costing (ABC) is a costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption of the activity by the product or service. Therefore, activities consume resources and products consume activities. Option A is incorrect because resources themselves do not consume activities; rather, resources are used to perform activities. Option C is incorrect because costs are not entities that consume other entities; rather, costs are a result of the consumption of resources and activities. Option D is incorrect because while resources are consumed by activities, activities themselves do not cause costs.

Which of the Following Statements Regarding Activity-Based Costing (ABC) Is