Activity based costing attempts to correct the distortions built into product costing:
A)by tracking cost drivers of indirect costs and turning indirect costs into direct.
B)by improving the way that direct costs are allocated.
C)by improving the way that the learning curve is applied to direct labor costs.
D)by tracking cost drivers of direct costs and turning direct costs into indirect.
E)by capturing labor and material usage more accurately.

Question

Quizplus · Accepted Answer

Activity based costing (ABC) is a costing method that attempts to allocate costs based on activities used in the production process. It does this by tracking all cost drivers associated with indirect costs and turning those indirect costs into direct costs. By doing so, ABC can provide a more accurate picture of the true cost of a product. This correction of distortions in product costing is the main goal of ABC. Options B, C, D, and E do not accurately reflect the purpose or methodology of ABC.

Activity Based Costing Attempts to Correct the Distortions Built into Product