In comparison to an activity-based costing system,traditional allocation systems would most likely distort which of the following costs?
A)product costs.
B)activity costs.
C)department costs.
D)plant costs.

Question

Quizplus · Accepted Answer

Traditional allocation systems tend to allocate indirect costs based on broad averages or general assumptions, rather than on specific activities that drive costs. This can result in product costs being distorted, as products that use more resources may be undercosted while products that use fewer resources may be overcosted. Activity-based costing, on the other hand, allocates indirect costs based on specific activities, providing a more accurate reflection of the true cost of each product. Therefore, option A is the correct choice. Choices B, C, and D are incorrect because both traditional allocation systems and activity-based costing systems allocate indirect costs to activities, departments, and plants, although the methods used to allocate these costs may differ.

In Comparison to an Activity-Based Costing System,traditional Allocation Systems Would