Which of the Following Statements Is True of Activity-Based Costing

question 92

Multiple Choice

Which of the following statements is true of activity-based costing?

• A) There is a clear cause-and-effect relationship between costs and the cost driver in the long run.
• B) There is no variety of cost drivers and cost pools.
• C) The system focuses on activities in together and not on individual activities.
• D) A single cost driver should be identified for all the activities.

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Definitions:

Departmental Overhead Rates

Specific overhead rates calculated for different departments within a company to more accurately assign costs.

Activity-based Costing

A costing method that assigns overhead costs to products based on the activities that consume resources in producing the product.

Product-level Activities

Operations or tasks that are performed specifically in support of producing a particular product, often influencing the cost associated with that product.

Departmental Overhead Rates

Rates used to allocate indirect costs to specific departments, based on departmental activities, to accurately assess their expenses.