Which of the following statement(s) regarding activity-based costing is (are) true? I. Use of activity-based costing improves cost tracing by using more cause-and-effect relationship to assign indirect costs to activity centers.II. An activity-based system is characterized by multiple cost pools and multiple volume and activity cost drivers.III. Activity-based costing can cause distortion of cost, assigning too much cost to some products and too little to others.
A)I and III
B)I and II
C)II and III
D)III only

Question

Quizplus · Accepted Answer

Statement I is true, as activity-based costing uses more cause-and-effect relationships to assign indirect costs to activity centers, which helps to improve cost tracing.

Statement II is also true, as an activity-based system is characterized by multiple cost pools and multiple volume and activity cost drivers.

Statement III is false because activity-based costing aims to reduce distortion of cost by accurately assigning indirect costs to products.

Which of the Following Statement(s) Regarding Activity-Based Costing Is (Are)