Which of the following is generally true when a company compares activity-based costing (ABC) and traditional volume-based costing?
A)ABC uses fewer cost drivers in an effort to reduce total costs.
B)ABC allocates costs based primarily on production volume.
C)ABC is less expensive.
D)ABC is less likely to undercost complex, low-volume products.

Question

Quizplus · Accepted Answer

Activity-based costing (ABC) is designed to better allocate costs to products or services based on the specific activities that drive those costs. This means that complex, low-volume products are less likely to be undercosted with ABC compared to traditional volume-based costing methods. ABC typically uses more cost drivers, and therefore can be more expensive to implement, but it provides a more accurate picture of costs for each product or service. So, options A, B, and C are incorrect.

Which of the Following Is Generally True When a Company