Unit costs can be significantly different when using activity-based costing compared to traditional cost allocation methods.

Question

Quizplus · Accepted Answer

Activity-based costing allocates costs based on the activities that drive them, while traditional cost allocation methods often use simpler methods such as direct labor hours or machine hours. This can result in significant differences in unit costs between the two methods, especially for complex or varied products or services.

Unit Costs Can Be Significantly Different When Using Activity-Based Costing