In comparison with a system that uses a single, volume-based cost driver, an activity-based costing system is preferred when a company has:
A) a large proportion of non-unit-level activities.
B) product-line diversity.
C) minimal product-line diversity and a small proportion of non-unit-level activities.
D) existing variances from budgeted amounts.
E) product-line diversity and a large proportion of non-unit-level activities.

Question

Quizplus · Accepted Answer

Activity-based costing is preferred when there is product-line diversity and a large proportion of non-unit-level activities, as it provides more accurate cost allocation by considering multiple cost drivers.

In Comparison with a System That Uses a Single, Volume-Based