The benefits of using the ABC costing system are higher if the company:
A)has high indirect costs.
B)produces many different products that use differing amounts of resources.
C)produces only one product.
D)has high indirect costs and produces many different products that use differing amounts of resources.

Question

Quizplus · Accepted Answer

The ABC costing system is most effective for companies that have high indirect costs and produce many different products that use differing amounts of resources. In this scenario, traditional costing systems may not accurately allocate costs to each product, leading to inaccurate pricing decisions and poor profitability. ABC costing provides a more accurate allocation of indirect costs based on the specific resources used by each product, resulting in better pricing decisions and increased profitability.

The Benefits of Using the ABC Costing System Are Higher