A company that uses activity-based costing would likely allocate costs from:
A)service departments to production departments.
B)service departments to products and services.
C)service departments to production departments and then to products and services.
D)activity cost pools to production departments.
E)activity cost pools to products or services.

Question

Quizplus · Accepted Answer

A company that uses activity-based costing would allocate costs from activity cost pools to products or services. This is because activity-based costing is a more precise method of cost allocation that traces costs to specific activities involved in producing a product or service. By allocating costs from activity cost pools to products or services, the company can gain a better understanding of the true cost of producing each item, which can help with pricing and profitability analysis.

A Company That Uses Activity-Based Costing Would Likely Allocate Costs