ECONOMICS

Detailed explanation-1: -When designing an activity-based costing system, related activities are frequently combined to reduce the amount of detail and record-keeping cost. Activity-based costing uses a number of activity cost pools, each of which is allocated to products on the basis of direct labor-hours.

Detailed explanation-2: -Which of the following is true about activity-based costing? Explanation: ABC assumes that the resource-consuming activities that generate costs are activities and not outputs. ABC is appropriate for all types of cost accumulation systems, including both job order and process costing.

Detailed explanation-3: -Activity-based costing provides a more accurate method of product/service costing, leading to more accurate pricing decisions. It increases understanding of overheads and cost drivers; and makes costly and non-value adding activities more visible, allowing managers to reduce or eliminate them.

Detailed explanation-4: -Explanation: Statement 1: It is not necessary that ABC costing always provides more benefits than the cost associated with its implementation. Thus, this statement is incorrect.

Detailed explanation-5: -An activity-based approach-refines a costing system by focusing on individual activities (events, tasks, or units of work with a specified purpose) as the fundamental cost objects. It uses the cost of these activities as the basis for assigning costs to other cost objects such as products or services.