What is the normal effect on the numbers of cost pools and allocation bases when an ABC system replaces a traditional cost system? Cost Pools Allocation Bases
A)Decrease Decrease
B)Decrease No effect
C)No effect Increase
D)Increase Increase

Question

Quizplus · Accepted Answer

When an ABC system replaces a traditional cost system, the number of cost pools typically increases as ABC system identifies and allocates costs to more detailed activity-based cost pools. At the same time, the number of allocation bases used also increases as ABC system uses a wider range of cost drivers to allocate costs to the identified cost pools. Hence, the correct choice is D, which indicates an increase in both cost pools and allocation bases.

What Is the Normal Effect on the Numbers of Cost