Why are more organizations adopting activity-based costing systems?
A)Computer technology has increased the costs of developing and operating ABC systems.
B)Indirect costs are not important in automated manufacturing environments.
C)Shortened product life cycles.
D)Less diversity in product mix offered to customers.

Question

Quizplus · Accepted Answer

Shortened product life cycles have increased the number and complexity of products organizations produce. As a result, traditional costing systems that rely on simple allocation measures such as direct labor hours or machine hours may not accurately reflect the actual cost of producing individual products. Activity-based costing (ABC) systems are better suited to capture the costs of producing individual products by focusing on the activities that drive costs rather than the volume of a particular measure. This allows organizations to make better decisions on pricing, product mix, and process improvement.

Why Are More Organizations Adopting Activity-Based Costing Systems