Manufacturing companies that benefit the most from activity-based costing are those where: A. Overhead costs are low and there is little diversity among products produced B. Overhead costs are low and there is considerable diversity among products C. Overhead costs are high and there is little diversity among products produced D. Overhead costs are high and there is considerable diversity among products

Question

Business

Yadiel Huynh

17 June, 04:59

Manufacturing companies that benefit the most from activity-based costing are those where: A. Overhead costs are low and there is little diversity among products produced B. Overhead costs are low and there is considerable diversity among products C. Overhead costs are high and there is little diversity among products produced D. Overhead costs are high and there is considerable diversity among products

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Answers (1)

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Jimena Bradford · Answer 1

The correct answer is letter "D": Overhead costs are high and there is considerable diversity among products.

Explanation:

Activity-Based Costing or ABC is a management accounting approach that assigns some indirect costs to goods incurring the bulk of certain costs. ABC is primarily used in the manufacturing sector to allow a proper estimate of the real cost of output per unit. ABC is mostly used when the firm offers a wide variety of products and their overhead costs are expensive.

Most businesses forego the use of ABC because the cost of introducing it exceeds the benefits of using it.