Question

An activity-based costing system is generally easier to set up and run than a traditional cost system.

True

False

Answer 1

Answer:- This statement is False. An activity-based costing system is generally easier to set up and run than a traditional cost system.

Explanation:- Activity-based costing is a way to allocate costs based on the amount of resources a product or services consumes. The use of ABC is especially important to enity that provide customized products or services. A customized production environment requires ABC’s allocation of actual indirect costs to a product to identify its true cost. Implementing ABC can be a challenging task for any business and the process carries several advantages and disadvantages.

Traditional costing is a much easier way of determining the cost of a product, since it relies solely on assigning average overhead rates. This also means it won’t always be as accurate, because it doesn’t factor in nonmanufacturing expenses or determine which overhead costs actually affect specific products.