Which of the following statements accurately describes the basis of activity-based costing?
A) Activities simply sustain a facility's general manufacturing process.
B) Activities are performed as needed to support the production of each different type of product.
C) Activities consume facility-level costs.
D) Activities consume resources and products consume activities.

Question

Quizplus · Accepted Answer

Activity-based costing recognizes that activities consume resources, and products consume activities. The costs of activities (such as setup, quality control, and material handling) can then be assigned to each product based on the amount of each activity it requires. This provides a more accurate picture of product costs than simply allocating overhead costs based on a single cost driver, such as machine hours or direct labor.

Which of the Following Statements Accurately Describes the Basis of Activity-Based