ECONOMICS

Detailed explanation-1: -The traditional costing system is an accounting method used to determine the cost of making products to make a profit, and it is based on allocating overhead (or indirect) manufacturing costs. This system relies on calculating predetermined overhead rates and applying the rates to a given metric.

Detailed explanation-2: -For example, a traditional costing calculation might find that factory overhead should be charged to products at the rate of $500 per direct labor hour, so if there is a slight change in the production process that increases direct labor by one hour, the cost of the product has just increased by $500 of overhead.

Detailed explanation-3: -Activity based costing is considered to be a traditional costing method. Wrong.

Detailed explanation-4: -ABC systems differ from traditional job order costing systems in the different costs that are assigned to products. Using traditional costing, only manufacturing costs can be assigned to products. Under ABC, both manufacturing and non-manufacturing costs may be assigned.