Question

Which of the following statements about activity-based costing (ABC) is false?

Option 1: Activity-based costing is useful for allocating marketing and distribution costs.

Option 2: Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products.

Option 3: In activity-based costing, cost drivers are what cause costs to be incurred.

Option 4: Activity-based costing differs from traditional costing systems in that products are cross-subsidized.

Answer 1

Option 4: Activity-based costing differs from traditional costing systems in that products are cross-subsidized is the false statement.

Step-by-step explanation:

Option 4: Activity-based costing differs from traditional costing systems in that products are cross-subsidized is the false statement.

Activity-based costing (ABC) is a costing method that allocates costs based on activities that consume resources. It is useful for accurately allocating costs to different activities, departments, or products. However, in ABC, products are not cross-subsidized; instead, each product is assigned its own portion of costs based on its usage of activities and cost drivers.