Which of the following statements is false?
A) Under traditional costing, product cost distortions will be relatively insignificant if overhead costs are a small proportion of product cost.
B) Activity-based costing will significantly improve the product cost accuracy where overhead costs are a small proportion of total costs.
C) Activity-based costing will significantly improve product cost accuracy where there is significant product diversity.
D) Upstream and downstream costs are often a significant part of a product's costs.

Question

Quizplus · Accepted Answer

Activity-based costing (ABC) is most beneficial and improves product cost accuracy significantly when overhead costs are a large proportion of total costs, not a small proportion. ABC allocates overhead costs based on activities that drive costs, rather than on volume measures, making it more effective when overheads are substantial and there's a diverse range of products.

Which of the Following Statements Is False