Cost accounting assigns production costs differently, depending on the product or service. Which choice below best describes activity-based costing?
A) Activity-based costing assigns costs to products or services that meet specific needs of an individual customer.
B) Activity-based costing determines the total cost of the production and averages it over the units produced.
C) Activity-based costing identifies specific business activity pools or fundamental business processes and then assigns costs based on the resources consumed by that activity or process.
D) Activity-based costing assigns costs based on the machinery they are manufactured on.

Question

Quizplus · Accepted Answer

Activity-based costing (ABC) is a method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each. This approach leads to more accurate product costing because it takes into account the specific activities that contribute to the production or delivery of each product or service.

Cost Accounting Assigns Production Costs Differently, Depending on the Product