Asked by Chasity Fields on Jun 09, 2024
Verified
Activity-based costing has most to offer where:
A) overhead is high and volume driven.
B) overhead is high and non-volume driven.
C) overhead is low and non-volume driven.
D) direct labour is a major proportion of total costs.
Activity-based Costing
An accounting method that assigns costs to products or services based on the activities they require, promoting more accurate cost management.
Non-volume Driven
Pertains to costs that do not change with the level of production or service volume.
- Identify the conditions under which activity-based costing offers the most benefits.
Verified Answer
MF
Marilyn FigueroaJun 15, 2024
Final Answer :
B
Explanation :
Activity-based costing is most useful in situations where overhead costs are high and non-volume driven. This is because traditional costing methods often allocate these overhead costs to products or services based on volume, which can lead to misallocation and inaccurate cost information. Activity-based costing, on the other hand, identifies specific activities and the resources required to perform those activities, and then allocates the overhead costs based on the actual consumption of those resources. This more accurately reflects the true cost of each product or service.
Learning Objectives
- Identify the conditions under which activity-based costing offers the most benefits.
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