Traditional Costing Systems Employ Multiple Allocation Rates, but an Activity-Based

question 2

True/False

Traditional costing systems employ multiple allocation rates, but an activity-based costing system uses only one rate for allocating manufacturing overhead.

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Definitions:

Factory Overhead Cost

Indirect costs associated with manufacturing, such as utilities, maintenance, and salaries for managers, that cannot be traced directly to specific products.

Direct Labor Cost

The cost associated with the work done by those actually manufacturing a product or directly providing a service.

Factory Overhead

Refers to all the indirect manufacturing costs, such as utilities and rent for the production facilities, which are not directly tied to individual products.

Total Product Cost

The full cost incurred to manufacture or acquire a product, including material, labor, and overhead expenses, up to the point of sale.