Question

Which of the following is not generally true when a company compares ABC and traditional costing?
A.        ABC uses more cost drivers.
B.        ABC allocates cost based solely on production volume.
C.        ABC is more expensive.
D.        ABC is less likely to undercost complex, low-volume products.

Answer 1

Correct answer is B.

ABC allocates cost based solely on production volume.

Activity-based costing (ABC) is an accounting strategy that recognizes and doles out costs to overhead activities and after that appoints those costs to items. An activity-based costing (ABC) framework perceives the relationship between costs, overhead activities, and made items, and through this relationship, it appoints indirect costs to items less arbitrarily than traditional strategies.

The ABC arrangement of cost accounting is based on activities, which is any occasion, unit of work, or undertaking with a particular objective, for example, setting up machines for production, planning items, distributing finished merchandise, or working machines. Activities consume overhead assets and are considered cost objects.