COST ACCOUNTING
ACTIVITY BASED COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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more variations and complexities require more activities
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they require more engineers
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they buy more robotics
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they require more direct laborers
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Detailed explanation-1: -ABC is a recent development in Cost Accounting which attempts to absorb overheads into product costs on a more realistic basis. The basic idea of ABC is that costs are grouped according to what drives them or causes them to be incurred. The cost drivers are then used as an absorption base.
Detailed explanation-2: -Option C is correct. An activity-Based Costing system is a method of allocating the cost to each product based on cost drivers. Non-value addition activities are those activities that do not provide for any value to the merchanise, so they are identified and eliminated.
Detailed explanation-3: -There are two main causes of product cost distortions in traditional costing, i.e., where a single production volume based overhead rate is used by each product department. These include product volume differences (or product volume diversity) and product differences (or product diversity).