Which of the Following Is Not a Limitation of Activity-Based

question 30

Multiple Choice

Which of the following is not a limitation of activity-based costing?

• A)Maintaining an activity-based costing system is more costly than maintaining a traditional direct labor-based costing system.
• B)Changing from a traditional direct labor-based costing system to an activity-based costing system changes product margins and other key performance indicators used by managers.Such changes are often resisted by managers.
• C)In practice,most managers insist on fully allocating all costs to products,customers,and other costing objects in an activity-based costing system.This results in overstated costs.
• D)More accurate product costs may result in increasing the selling prices of some products.
• E)Complex products are assigned a larger portion of overheaD.An activity-based costing system is more costly to maintain than a traditional costing system.Activity-based costing produces numbers,such as product margins,that are at odds with the numbers produced by traditional costing systems.Assigning more overhead to complex products is an advantage because it more accurately reflects use of the cost driver.

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