Companies That Use Activity-Based Costing Do NOT Need to Trace

question 3

True/False

Companies that use activity-based costing do NOT need to trace direct materials and direct labor to products as is done in traditional costing systems.

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Definitions:

Inventory

The total amount of goods and materials held by a company in stock, ready for sale or production.

Fixed Assets

Long-term tangible assets used in the operation of a business and not expected to be converted to cash in the upcoming fiscal year.

Days' Sales In Inventory

An indicator that reflects the average number of days a company requires to convert its inventory into sales.

Inventory Ratio

A financial metric that indicates how many times a company's inventory is sold and then replaced over a specific period.