Answer (D) is correct . A difficulty in applying ABC is that, although the first three levels of activities pertain to specific products or services, facility-level activities do not. Thus, facility-level costs are not accurately assignable to products. The theoretically sound solution may be to treat these costs as period costs. Nevertheless, organizations that apply ABC ordinarily assign them to products to obtain a full absorption cost suitable for external financial reporting in accordance with GAAP. However, for internal purposes, facility-level costs should be treated as period costs to avoid distorting decisions about cost efficiency, pricing, and profitability.
Answer (A) is incorrect because Unit-level costs relate to particular products (or services).
Answer (B) is incorrect because Batch-level costs relate to particular products (or services).
Answer (C) is incorrect because Product-level costs relate to particular products (or services).
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