Which of the following statements is true of costing systems? A. ABC systems always result in...

Which of the following statements is true of costing systems?

A. ABC systems always result in overcosting of products.
B. ABC systems classify some indirect costs as direct costs helping to improve processes
C. Single-indirect cost pool systems always result in overcosting of products.
D. Single-indirect cost pool systems classify some direct costs as indirect costs.

Solutions

Expert Solution

Statement B. i.e. ABC systems classify some indirect costs as direct costs helping to improve processes is true.

Activity-based costing is a costing method that assigns the various indirect costs and overhead costs to the product it relates with. All such kinds of costs are divided by the cost divers like hours, units and then allocated to individual products on the basis of cost drivers used by each product. These cost drivers are directly related to the products and hence indirectly helps to classify some indirect costs as direct costs.

Statement A & C are incorrect as they are the methods of allocating the indirect costs which can sometimes results in overcosting of products but now always.

Statement D is incorrect as Single-indirect cost pool systems never classify any direct costs as indirect costs as it just allocates the indirect cost on the basis of single rate system making the given statement untrue.

ekkarill92 answered 1 year ago

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