Which of the following statements is (are) true regarding a company that has implemented flexible manufacturing systems and activity-based costing?
I. The company has erred, as these two practices used in conjunction with one another will severely limit the firm's ability to analyze costs over the relevant range.
II. Costs formerly viewed as fixed under traditional-costing systems may now be considered variable with respect to changes in cost drivers such as number of setups, number of material moves, and so forth.
III. As compared with the results obtained under a traditional-costing system, the concept of break-even analysis loses meaning.
A) I only.
B) II only.
C) III only.
D) I and II.
E) II and III.

Question

Quizplus · Accepted Answer

II. Flexible Manufacturing Systems (FMS) and Activity-Based Costing (ABC) allow a company to more accurately trace costs to activities and products. This means costs that were traditionally considered fixed can now be seen as variable based on activities like setups and material moves. Statement I is incorrect because using FMS and ABC together enhances a firm's ability to analyze costs accurately rather than limiting it. Statement III is also incorrect because break-even analysis remains meaningful; it's just that the analysis may be more nuanced and accurate with ABC, as it provides a better understanding of cost behavior.

Which of the Following Statements Is (Are) True Regarding a Company