Activity-based costing is a costing method that is designed to provide managers with product cost information for external financial reports

Question

Quizplus · Accepted Answer

The statement is false. Activity-based costing is designed to provide managers with more accurate product cost information for internal decision-making purposes, not necessarily for external financial reports. Traditional costing systems typically allocate overhead costs based on direct labor hours or machine hours, whereas activity-based costing allocates overhead costs based on the activities that cause those costs to be incurred. This allows for a more accurate allocation of indirect costs to specific products or services.

Activity-Based Costing Is a Costing Method That Is Designed to Provide