Which of the following statements about activity-based costing is not true?
A. Activity-based costing is useful for allocating marketing and distribution costs.
B. Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products.
C. In activity-based costing, cost drivers are what cause cost to be incurred.
D. Activity-based costing differs from traditional costing systems in that products are less likely to be cross-subsidized.
Answer:B
B is corrent. Activity-based costing is likely to result in major differences when the firm manufactures multiple products.
A is incorrect. Activity-based costing is designed to allocate the costs of production.
C is incorrect. Cost drivers are supposed to be selected that cause costs to be incurred.
D is incorrect. Activity-based costing results in a more accurate allocation of costs. Products are less likely to be cross-subsidized.
