One difference between a traditional costing system and an ABC system is:
A) An ABC system allocates overhead to units of goods or services
B) An ABC system has more cost pools and more cost drivers
C) An ABC system traces direct materials to units and considers them to vary with volume
D) Information from an ABC system can be used for GAAP

Question

Quizplus · Accepted Answer

A traditional costing system typically uses only one or a few cost pools and a small number of cost drivers to allocate overhead costs to products, while an ABC system uses multiple cost pools and many cost drivers to more accurately allocate overhead costs to products, services, or activities based on the specific factors that drive those costs. ABC systems are generally considered to be more accurate and useful for decision-making than traditional costing systems. Choices A, C, and D are not accurate statements about the differences between traditional and ABC costing systems.

One Difference Between a Traditional Costing System and an ABC