Final answer:
In an Activity-Based Costing system, cost reduction is primarily achieved by identifying and eliminating Nonvalue-Adding activities. This method focuses on trimming activities that don't enhance the customer's perceived value of a product or service, which can substantially lower variable costs without affecting production output.
Thus the corret opction is:1
Step-by-step explanation:
In an Activity-Based Costing (ABC) system, cost reduction is accomplished by identifying and eliminating Nonvalue-Adding activities.
These are activities that do not add value to the product or service from the perspective of the customer, and therefore the cost associated with these activities can be targeted for reduction or elimination.
In contrast, it's essential not to confuse these with essential Cost Drivers Activities or necessary labor and overhead costs.
Understanding the different types of costs, such as fixed costs and variable costs, is crucial in managing and reducing expenses.
Fixed costs, such as rent, do not change with production levels, while variable costs, like labor and raw materials, vary with output.
Eliminating nonvalue-adding activities helps in reducing variable costs without compromising the quality or quantity of the goods or services produced.
The complete question is:In an activity-based costing (ABC) system, cost reduction is accomplished by identifying and eliminating
Option 1: Nonvalue-Adding activities.
Option 2: All Cost Drivers Activities.
Option 3: Indirect labor costs.
Option 4: Fixed manufacturing overhead.