Activity-based costing is a method of cost allocation that is useful for assigning ____ costs to products or services.
A) direct materials
B) direct labor
C) overhead
D) direct materials and direct labor

Question

Quizplus · Accepted Answer

Activity-based costing is designed to allocate indirect or overhead costs to products or services based on the activities that contribute to those costs. This method is more accurate than traditional methods that allocate overhead based on a single predetermined rate, as it recognizes the diverse activities that can generate overhead costs. Direct materials and direct labor costs are typically assigned using other methods, such as job costing or process costing.

Activity-Based Costing Is a Method of Cost Allocation That Is