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siushan
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Posted: 23 Apr 2011 at 02:41 \| IP Logged

Which of the following statements about activity-based costing is not true?

A. Activity-based costing is useful for allocating marketing and distribution costs.

B. Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products.

C. In activity-based costing, cost drivers are what cause cost to be incurred.

D. Activity-based costing differs from traditional costing systems in that products are not cross-subsidized

The answer is C.

I think the answer C is a true statement and have no idea why it is not true. Appreciate if anyone can help. Thanks

jiejenn
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Posted: 23 Apr 2011 at 16:15 \| IP Logged

volume not cost. Cost driver is giving, therefore, volume will become your variable.

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shally
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Posted: 24 Apr 2011 at 14:57 \| IP Logged

this is how i understand the cost drivers - they are
activity bases that are closely correlated with the
incurrence of mfg. overhead costs. My point is they are the
"basis" for cost allocation rather than being the cause for
the cost incurred.

siushan
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Posted: 24 Apr 2011 at 23:56 \| IP Logged

I have a question regarding to choice B. I think this statement is not true, because ABC should be more likely to result in major difference when the firm manufactures multiple products.

Why is ABC more likely to result in major difference when the firm manufactures one product?

Thanks

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