In an activity-based costing (ABC)system,what should be used to assign departmental manufacturing overhead costs to products produces in varying lot sizes?
A) A product's ability to bear cost allocations.
B) A single cause-and-effect relationship.
C) Multiple cause-and-effect relationships.
D) Relative net sales values of the products.

Question

Quizplus · Accepted Answer

In an activity-based costing system, multiple cause-and-effect relationships should be used to assign departmental manufacturing overhead costs to products produced in varying lot sizes. This is because the traditional approach of using a single cause-and-effect relationship may not accurately allocate costs to the different products, especially when the manufacturing process involves multiple activities that consume different amounts of resources. By using multiple cause-and-effect relationships, the ABC system can identify the specific activities that contribute to manufacturing overhead and assign the costs accordingly. This results in a more accurate and fair allocation of costs to products. A product's ability to bear cost allocations or relative net sales values are not relevant factors in assigning departmental manufacturing overhead costs in an ABC system.

In an Activity-Based Costing (ABC)system,what Should Be Used to Assign