Asked by Roberta Carubia on May 17, 2024
Verified
Companies are likely to benefit from activity-based costing systems if:
A) they have wide variations in the volume of individual production runs and setups are costly.
B) they have a narrow range of products with similar volumes and setups are costly.
C) they have a narrow range of products and setups are not costly.
D) None of the given answers.
Activity-based Costing Systems
A method in accounting that assigns costs to products or services based on the activities that go into producing them, aiming to provide more accurate costing.
Production Runs
The process of manufacturing a certain quantity of products at one time, often measured as a batch or lot.
- Ascertain situations in which activity-based costing yields the most substantial benefits.
Verified Answer
KA
Karynn AdamsMay 18, 2024
Final Answer :
A
Explanation :
Activity-based costing systems are designed to allocate costs to individual production runs, setups, or activities. Companies with wide variations in the volume of individual production runs will benefit from ABC systems as they help to identify the true cost of each individual product. Additionally, setups are often costly, so ABC systems can help to ensure that all costs are properly allocated to each product.
Learning Objectives
- Ascertain situations in which activity-based costing yields the most substantial benefits.
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