Select the correct statement regarding activity-based costing (ABC).
A) ABC does not use cost drivers.
B) ABC uses a single activity center but multiple cost drivers.
C) ABC uses multiple activity cost centers and multiple cost drivers.
D) ABC uses multiple activity cost centers but a single cost driver.

Question

Quizplus · Accepted Answer

Activity-based costing (ABC) uses multiple activity cost centers and multiple cost drivers to allocate indirect costs to products or services. The goal of ABC is to provide a more accurate allocation of overhead costs by identifying specific activities that consume resources and assigning costs based on the actual consumption of those resources. Option A is incorrect as ABC relies heavily on cost drivers to assign costs to products or services. Option B is also incorrect as ABC uses multiple activity cost centers to reflect the different activities that occur within an organization. Option D is incorrect as ABC uses multiple cost drivers to allocate costs across various activities.

Select the Correct Statement Regarding Activity-Based Costing (ABC)