Asked by Gabriel Barrowman on May 26, 2024
Verified
Which of the following is a limitation of activity-based costing?
A) More cost bases.
B) Less control over overhead costs.
C) Poorer management decisions.
D) Some arbitrary allocations continue.
Activity-Based Costing
A method in accounting that assigns costs to products or services based on the activities required to produce or deliver them.
Overhead Costs
Indirect costs associated with operating a business, such as utilities, rent, and administrative expenses, not directly tied to a specific product or service.
Arbitrary Allocations
The distribution of costs based on criteria that may not precisely reflect the actual consumption or benefit of those costs.
- Analyze the impact of activity-based costing (ABC) and its limitations.
Verified Answer
SK
Shreyal KamatMay 30, 2024
Final Answer :
D
Explanation :
Activity-based costing may still require some arbitrary allocations, which could affect the accuracy of the cost assignments.
Learning Objectives
- Analyze the impact of activity-based costing (ABC) and its limitations.