Asked by megha ramani on Jun 24, 2024
Verified
Traditional product costing does not generally include non-manufacturing costs despite the fact that these costs are now a significant proportion of most organisations' total costs.
Traditional Product Costing
A costing method that assigns manufacturing overhead costs to products based on volume-related measures such as direct labor hours or machine hours.
Non-manufacturing Costs
Expenses that are not directly involved in the production of goods, including selling, general, and administrative expenses.
- Determine the circumstances where activity-based costing (ABC) is preferable over conventional costing methods.
- Understand the advantages and motivations for integrating an Activity-Based Costing (ABC) system across various organizational environments.
Verified Answer
LC
LaidBack CefoeJun 25, 2024
Final Answer :
True
Explanation :
Traditional product costing focuses mainly on the direct and indirect costs associated with manufacturing a product, while non-manufacturing costs such as marketing, distribution, and administrative expenses are often not included. However, these non-manufacturing costs have become increasingly significant for many organizations and should be considered in their overall cost analysis.
Learning Objectives
- Determine the circumstances where activity-based costing (ABC) is preferable over conventional costing methods.
- Understand the advantages and motivations for integrating an Activity-Based Costing (ABC) system across various organizational environments.
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