Activity-based costing is most likely to yield benefits for companies ________.
A) with complex product design processes
B) with operations that remain fairly consistent
C) in a monopolistic market
D) having nominal percentage of indirect costs

Question

Quizplus · Accepted Answer

Activity-based costing is designed to accurately allocate indirect costs to specific products, services, or activities. It is most beneficial for companies with complex product design processes because they have a high degree of indirect costs that are difficult to allocate accurately using traditional costing methods. It may not be as useful for companies with operations that remain fairly consistent or in a monopolistic market where pricing power is already high. Additionally, companies with a nominal percentage of indirect costs may not see a significant benefit from implementing activity-based costing.

Activity-Based Costing Is Most Likely to Yield Benefits for Companies