When moving from a traditional costing system to an activity-based system, there is a significant improvement in the accuracy of the product costs because:
A) simple activity costing assumes that all manufacturing overhead costs are driven by the volume of production.
B) simple activity-based costing allocates overheads based on the cost per activity driver.
C) improved identification of cost drivers results in more accurate allocation of manufacturing overheads to products.
D) simple activity-based costing allocates overheads based on the cost per activity driver, resulting in more accurate allocation of manufacturing overheads to products.

Question

Quizplus · Accepted Answer

Simple activity-based costing allocates overheads based on the cost per activity driver, resulting in more accurate allocation of manufacturing overheads to products. This means that by identifying and allocating costs based on the specific activities that create them, an activity-based costing system is able to provide a more accurate reflection of the actual costs associated with producing each product. This is a significant improvement over traditional costing systems, which often rely on less precise and less relevant cost drivers, such as direct labor hours or machine hours.

When Moving from a Traditional Costing System to an Activity-Based