Question

LO 6.3Which of the following is a reason a company would implement activity-based costing?

The cost of record keeping is high.
The additional data obtained through traditional allocation are not worth the cost.
They want to improve the data on which decisions are made.
A company only has one cost driver.

Answer 1

Answer: The correct answer is "They want to improve the data on which decisions are made.".

Explanation: "They want to improve the data on which decisions are made." is a reason for a company to implement activity based costing.

Because the activity-based costing allows the members in charge of the company's management to obtain more precise information on the cost of the product, identifying which activities generate more value and which activities are unnecessary, which causes higher quality decision making .