Asked by Seema AlHiraki on Jun 10, 2024
Verified
The more activities tracked by activity-based costing,the more accurately overhead costs are assigned.
Activity-based Costing
A costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.
Overhead Costs
Indirect costs of running a business that are not directly tied to production, such as rent, utilities, and salaries.
- Acknowledge the essentiality of allocating overhead costs correctly and the repercussions of different allocation approaches on the accuracy of product costs.
- Learn the methodology behind activity-based costing and its significance in the apportionment of overhead costs.
Verified Answer
AK
Aleksey KhrolJun 10, 2024
Final Answer :
True
Explanation :
Activity-based costing is designed to assign costs more accurately by tracking various activities and their related costs, which leads to a better allocation of overhead costs. Therefore, the more activities tracked, the more accurate the overhead costs allocation will be.
Learning Objectives
- Acknowledge the essentiality of allocating overhead costs correctly and the repercussions of different allocation approaches on the accuracy of product costs.
- Learn the methodology behind activity-based costing and its significance in the apportionment of overhead costs.
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