A Key Reason for Using an ABC System Rather Than

question 34

Multiple Choice

A key reason for using an ABC system rather than a department-costing system is because ABC assigns indirect costs:

• A)using broader averages
• B)more simply than a department-costing system
• C)in a less costly manner
• D)to reflect differences required by different processes as well as customers

---

Definitions:

Opening Inventory

The quantity and value of stock available at the start of an accounting period.

Absorption Costing

A method of accounting that encompasses the total manufacturing expenses – encompassing direct materials, direct labor, as well as both variable and fixed overhead costs – within the product's cost.

Variable Costing

An accounting method that only considers variable costs in product pricing and decision making.

Fixed Overhead Expensed

The practice of charging fixed overhead costs to the income statement in the period they are incurred, rather than allocating them to products.