(Appendix 7A)Why would an activity-based costing system that is designed for internal decision making NOT conform to generally accepted accounting principles?
A) Some manufacturing costs (i.e., the costs of idle capacity and organization-sustaining costs) will not be assigned to products.
B) Some non-manufacturing costs are assigned to products.
C) First-stage allocations may be based on subjective interview data.
D) All of the above.

Question

Quizplus · Accepted Answer

All of the above options are reasons why an activity-based costing system designed for internal decision making may not conform to generally accepted accounting principles. Assigning idle capacity costs and organization-sustaining costs to products is not always straightforward in an ABC system. Also, non-manufacturing costs, such as marketing and administration expenses, may be assigned to products with ABC. Finally, first-stage cost allocations may be based on subjective data such as interviews with personnel, which may not be considered objective under generally accepted accounting principles.

(Appendix 7A)Why Would an Activity-Based Costing System That Is Designed