Question

Which of the following statements is true of ABC​ systems? A. ABC system is least suited for service companies. B. ABC system is simpler compared to traditional systems. C. ABC system will always result in higher product costs. D. ABC system employs multiple activityminuscost drivers.

Answer 1

The correct option is D, ABC system employs multiple activity cost drivers

Step-by-step explanation:

Option A is wrong is as ABC is preferred choice in service industries where there is complexity in nature of costs incurred that traditional absorption costing fails to deal with appropriately.

Option B is wrong as ABC system is more difficult compared to traditional systems which are pretty straightforward

Option C is wrong as ABC system does not always result in higher product costs, but traditional systems tend to over-cost high volume product and attribute lower cost to low volume product which are more complex.

ABC uses different cost drivers that are appropriate in each circumstance.