A major advantage in changing from a traditionally-based costing system to an activity-based costing system is:
A)A company's customers can benefit from any reduction in costs.
B)Management will be able to identify the true cost of non-added-value activities.
C)Direct labour and material costs will be reduced.
D)Supplier costs will be reduced after the changeover.

Question

Quizplus · Accepted Answer

Activity-based costing system provides a more accurate picture of the true cost of non-added-value activities, which enables management to identify areas where cost reductions can be made. This can result in more efficient resource allocation and cost savings. However, it does not necessarily lead to a reduction in direct labour and material costs, nor does it directly impact supplier costs. The benefit to customers is indirect and may vary depending on the specific circumstances.

A Major Advantage in Changing from a Traditionally-Based Costing System