Final answer:
Manufacturing overhead costs can be assigned to products using activity-based costing, which allocates costs based on the actual activities consumed by each product, providing a more accurate determination of production costs.
Step-by-step explanation:
Yes, manufacturing overhead costs can indeed be assigned to products under activity-based costing (ABC). Unlike traditional costing methods, which often allocate overhead to products based on simplistic measures such as direct labor hours, ABC uses multiple cost drivers to allocate costs more accurately. This method identifies activities in an organization and assigns costs to products based on the actual consumption of each activity. For example, if quality testing is an activity, the cost of quality testing staff and equipment is assigned to products that actually undergo testing. This approach provides a more accurate determination of the true cost of production, especially in complex manufacturing environments where overhead costs are a significant portion of total costs.
ABC is particularly useful for firms seeking a long-run perspective on cost structure and profitability. It allows firms to better understand their fixed and variable costs and make more informed decisions about production quantities and pricing. The implementation of ABC can lead to insights that might shift the long-run average cost curve, potentially affecting market strategies and the size distribution of firms in an industry.