Question

The firms that have plants with multiple products, high product diversity, and significant non-unit-level overhead are candidates for:

a. a unit-based costing system using direct material rate.
b. an activity-based costing system.
c. a traditional costing system.
d. a direct tracing costing system.

Answer 1

An activity-based costing system is most suitable for firms with multiple products, high diversity, and significant non-unit-level overhead.

Step-by-step explanation:

The firms that have plants with multiple products, high product diversity, and significant non-unit-level overhead are candidates for:

1. a unit-based costing system using direct material rate.
2. an activity-based costing system.
3. a traditional costing system.
4. a direct tracing costing system.

Out of these options, an activity-based costing system would be most suitable for firms with multiple products, high diversity, and significant non-unit-level overhead. This costing system assigns costs to products based on the activities that drive those costs, providing a more accurate representation of the actual costs incurred by each product.