Which of the following factors is NOT considered to have influenced the development of activity-based costing...
Which of the following factors is NOT considered to have influenced the development of activity-based costing ?
a. Availability of sophisticated accounting software that provides accurate and detailed cost information on a timely basis.
b. Increase in direct costs as a proportion of total product costs.
c. Increase in overhead costs as a proportion of total product costs.
d. Diversity of products with a mix of high and low volume products.
Homework Answers
Which of the following factors is NOT considered to have influenced the development of activity-based costing ?
a. Availability of sophisticated accounting software that provides accurate and detailed cost information on a timely basis.
b. Increase in direct costs as a proportion of total product costs.
c. Increase in overhead costs as a proportion of total product costs.
d. Diversity of products with a mix of high and low volume products
Option B is correct
since ABC costing is a method of allocation of overhead cost increase in Direct cost does not affect Overhead cost hence it cant be the reason for development of ABC method
Why others are incorrect( It means they were responsible for development of ABC system)
a) Its because of these software its easy to calculate minutes costs and help in ABC costing
c) Its the main reason for the development of ABC costing as overhead cost is increasing day by day and main motive ABC is to allocate overhead costing based on its usage of overhead.
d) Its also the reason for development of ABC as there high low volume of products , high volume product may be using less overhead and low volume product may be using high overheads unless ABC is not applied it may lead to incorrect decision making
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