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 small proportion of non-unit-level activities.
B)product line diversity or a large proportion of non-unit-level activities.
C)minimal product line diversity and a small proportion of non-unit-level activities.
D)existing variances from budgeted amounts.
E)uses a single overhead pool.

Question

Quizplus · Accepted Answer

Activity-based costing system is preferred when a company has product line diversity or a large proportion of non-unit-level activities. This is because it allows for more accurate allocation of indirect costs to different products or activities based on the specific resources used. A single volume-based cost driver may not be able to accurately capture the differences in indirect costs for products with different demands on resources or activities with different levels of complexity.

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