Asked by arjun trivedi on Jul 16, 2024
Verified
An important assumption in using ABC is that
A) production must take place on a continuous basis.
B) all costs in an activity should respond proportionately to changes in the activity level of the cost driver.
C) production must take place on a just-in-time basis.
D) all costs are pushed through each process when customer orders are received.
Cost Driver
An activity or factor that incurs costs based on its level of use or consumption, influencing the total cost of production.
Activity Level
A measure of the volume or quantity of production or operations in a business, which can significantly impact costs.
- Evaluate the influence of activity-based costing (ABC) along with its shortcomings.
Verified Answer
NA
Norma AlmanasirJul 19, 2024
Final Answer :
B
Explanation :
ABC assumes that all costs in an activity should respond proportionately to changes in the activity level of the cost driver. This means that costs cannot be assumed to be fixed or variable based solely on their behavior in the past, but instead must be analyzed in relation to the underlying activity that drives them. The other options (A, C, and D) are not accurate assumptions in using ABC.
Learning Objectives
- Evaluate the influence of activity-based costing (ABC) along with its shortcomings.
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