Answer (B) is correct . An activity-based costing (ABC) system identifies the causal relationship between the incurrence of cost and the underlying activities that cause those costs. Under an ABC system, costs are applied to products on the basis of resources consumed (drivers).
Answer (A) is incorrect because Direct costing is a system that treats fixed costs as period costs; in other words, production costs consist only of variable costs, while fixed costs are expensed as incurred.
Answer (C) is incorrect because Cycle time is the period from the time a customer places an order to the time that product is delivered.
Answer (D) is incorrect because Variable costing is the same as direct costing, which expenses fixed costs as incurred.
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