ABC systems seek a cost allocation base that has a cause-and-effect relationship with costs in the cost pool.

Question

Quizplus · Accepted Answer

ABC (Activity-Based Costing) systems seek to allocate costs based on the activities that cause those costs, rather than simply allocating costs based on some arbitrary allocation base. This is because costs are typically driven by specific activities or processes, and by allocating costs based on these activities, ABC systems can provide more accurate and meaningful information about the true costs of different products, services, customers, or activities. Therefore, a cost allocation base in ABC systems typically has a cause-and-effect relationship with costs in the cost pool, making answer A true.

ABC Systems Seek a Cost Allocation Base That Has a Cause-And-Effect