Author Question: Do activity-based costing systems always provide more accurate product costs than conventional cost ... (Read 114 times)

EY67 · **on:** Jul 5, 2018

Do activity-based costing systems always provide more accurate product costs than conventional cost systems? Why or why not?

What will be an ideal response?

Question 2

Mandy withdraws 600 from her business. This transaction increases cash but decreases owner's equity.
a. True
b. False
Indicate whether the statement is true or false

sarah_brady415 · **Reply #1 on:** Jul 5, 2018

Answer to Question 1

Answer: No. Traditional systems contain smaller and fewer cost distortions when the traditional systems' unit-level assignments and the alternative activity-cost drivers are relatively similar in proportion to each other. Still, the use of unit-level measures to assign indirect costs is more likely to undercost low-volume products and more complex products. Both traditional product-costing systems and ABC product-costing systems seek to assign all manufacturing costs to products. Cost distortions occur when a mismatch (incorrect association) occurs between the way support costs are incurred and the basis for their assignment to individual products.

Answer to Question 2

False