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What is the primary benefit of using activity-based costing (ABC)?
What is the primary benefit of using activity-based costing (ABC)?
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What is the primary benefit of using activity-based costing (ABC)?
It simplifies the costing process
It provides more accurate product costing
It reduces the number of cost pools
It eliminates the need for variance analysis
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Activity-based costing (ABC) provides more accurate product costing by assigning costs based on actual activities.
Questions & Step-by-step Solutions
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Q
Q: What is the primary benefit of using activity-based costing (ABC)?
Solution:
Activity-based costing (ABC) provides more accurate product costing by assigning costs based on actual activities.
Steps: 5
Show Steps
Step 1: Understand that costing is how we figure out how much it costs to make a product.
Step 2: Know that traditional costing methods might not show the true cost of making a product.
Step 3: Learn that activity-based costing (ABC) looks at the actual activities involved in making a product.
Step 4: Realize that ABC assigns costs based on these activities, rather than just spreading costs evenly.
Step 5: Conclude that the primary benefit of ABC is that it gives a more accurate picture of product costs.
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