Question

Which of the following is not true regarding activity-based costing (ABC) systems?

A. ABC can provide more accurate product costs.
B. ABC identifies more costs as indirect costs than do traditional volume-based systems.
C. ABC is likely to be more time-consuming than volume-based systems.
D. ABC is used in both manufacturing and non-manufacturing companies.
E. ABC is likely to have more overhead rates than volume-based systems.

Answer 1

Out of the options provided, the statement that is not true regarding activity-based costing (ABC) systems is option E. ABC is likely to have more overhead rates than volume-based systems.

Step-by-step explanation:

Out of the options provided, the statement that is not true regarding activity-based costing (ABC) systems is option E. ABC is likely to have more overhead rates than volume-based systems.

Activity-based costing (ABC) is a costing method that assigns indirect costs to products or services based on the activities they require. It aims to provide more accurate product costs and identify more costs as indirect costs compared to traditional volume-based systems. However, ABC is known to be more time-consuming because it requires a detailed analysis of activities and their costs.

ABC is used in both manufacturing and non-manufacturing companies to gain a better understanding of cost drivers and allocate costs more accurately. It does not necessarily mean that ABC will have more overhead rates than volume-based systems.