Final answer:
The true statement about activity-based costing (ABC) systems is that they use cost drivers to allocate overhead costs to products or services, making them more accurate than traditional costing methods, though more complex to implement. The correct option is C.
Step-by-step explanation:
Regarding activity-based costing (ABC) systems, the true statement is: (C) ABC systems use cost drivers to allocate overhead costs to products or services. Unlike traditional costing systems, which may allocate overhead broadly, activity-based costing systems aim to provide a more accurate method of cost allocation by identifying and using specific activities as cost drivers. These cost drivers could include the number of machine hours, the number of times an activity is performed, or any action that incurs cost. By employing these cost drivers, ABC systems can allocate costs more precisely to the products or services that actually consume the resources.
Compared to traditional costing systems, ABC systems are often seen as more complex and harder to implement due to the detailed analysis required to identify relevant cost drivers. Therefore, statement (B) is incorrect. Moreover, ABC systems are designed to be more accurate in allocating overhead costs, refuting statement (D) and unlike what statement (A) suggests, ABC systems do not accumulate overhead costs by departments, but rather by activities that drive costs.
By understanding ABC systems, firms can gain critical insights into their cost structure which, when broken down into fixed cost, marginal cost, average total cost, and average variable cost, allows for a nuanced view into overall financial performance and decision-making processes.