Question

Advantages of the activity-based costing include:

A. more effective overhead cost control

B. product cost distortion may occur

C. lower costs to implement and maintain

D. accurate assignment of costs to products

E. better production and pricing decisions

Answer 1

Activity-based costing offers advantages such as effective overhead cost control, accurate cost assignments to products, and improved production and pricing decisions, thanks to its detailed cost allocation.

Step-by-step explanation:

The advantages of activity-based costing (ABC) include a more effective overhead cost control, an accurate assignment of costs to products, and better production and pricing decisions. These benefits arise due to ABC's detailed approach to allocating costs to activities and then to products based on their actual consumption of resources, rather than using a broad average. This precision helps businesses understand the true cost of production for each product, which in turn informs more strategic pricing and product development decisions.