Which of the following is a sign that an ABC system will provide benefits?
A) There are relatively few indirect cost pools associated with the product and the indirect costs are a small percentage of total product cost
B) All the products produced are similar and sell in equal proportions (sales mix)
C) Operations staff has no substantial disagreements with the reported costs of manufacturing and marketing products and services.
D) All or most indirect costs are treated as output-unit level costs.

Question

Quizplus · Accepted Answer

Activity-Based Costing (ABC) systems are most beneficial when indirect costs form a significant portion of total costs and are not directly related to the volume of production. Choice D indicates a situation where indirect costs are treated as output-unit level costs, suggesting a traditional costing approach that might not accurately reflect the consumption of resources by different products. ABC systems improve costing accuracy by allocating indirect costs based on the actual activities that drive those costs, making it particularly useful in scenarios described by D.

Which of the Following Is a Sign That an ABC