Which Statement About Costing Systems Is True

question 61

Multiple Choice

Which statement about costing systems is true?

• A) Both traditional and activity-based costing systems use a two-stage allocation process
• B) Traditional costing systems use a two-stage allocation process, but ABC systems require three stages
• C) ABC systems typically use a two-stage allocation process, whereas traditional systems use a single stage
• D) Both traditional and activity-based costing systems use a three-stage allocation process

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Definitions:

Overhead Application Rate

A method for assigning indirect costs to produced goods based on a formula, often related to the level of production activity.

Direct Labor Costs

The total cost of workforce directly involved in the production of goods or services, typically including wages and salaries of manufacturing or production employees.

Work in Process Inventory

Items in a manufacturing process that are not yet completed products; it includes raw materials, labor, and overhead costs incurred up to that point.

Factory Overhead

All indirect costs associated with manufacturing, excluding direct materials and direct labor expenses. It includes costs like utilities and maintenance of machinery.