Final answer:
The most representative statement of activity-based costing compared to department costing is the use of multiple cost-allocation bases, emphasizing accurate cost assignment via numerous cost drivers and multiple cost pools.The correct option is D.
Step-by-step explanation:
The statement that is more representative of activity-based costing (ABC) in comparison to a traditional department costing system is A. The use of multiple cost-allocation bases.
Unlike department costing, where costs may be allocated based on a single measure such as machine hours or labor hours, ABC uses a variety of cost drivers that are more relevant to the activities being performed.
This allows for a more precise allocation of indirect costs, resulting in more accurate product costing.
Additionally, activity-based costing incorporates the concept of multiple cost pools, which refers to the separation of overhead into various groups.
Each pool is then allocated based on the relevant cost-allocation base that is most directly associated with the cause-and-effect relationship of the costs incurred.
While breaking down total costs into components like fixed cost, marginal cost.
average total cost, and average variable cost is useful for broad financial analysis, activity-based costing provides a different kind of insight by focusing on the way resources are consumed by specific activities. The correct option is D.