Which of the following is a likely advantage in activity-based costing (ABC)?
A) A decrease in the need to maintain accurate cost driver information.
B) A decrease in the need to maintain accurate overhead cost information.
C) An increase in the ability to trace indirect costs to specific activities.
D) As increase in the cost of accumulating, tracking, and assigning costs to products and services.

Question

Quizplus · Accepted Answer

Activity-based costing (ABC) provides a better understanding of the cost drivers and activities involved in producing products or services. An advantage of ABC is an increase in the ability to trace indirect costs to specific activities. This allows for a more accurate allocation of costs to products or services, resulting in better decision-making and cost control. ABC requires the maintenance of accurate cost driver information, and thus, choice A is incorrect. Choice B is also incorrect as ABC relies heavily on accurate overhead cost information. Choice D is incorrect as the cost of accumulating, tracking, and assigning costs to products and services is generally higher in traditional costing systems than in ABC.

Which of the Following Is a Likely Advantage in Activity-Based