All of the following statements regarding activitybased cost

All of the following statements regarding activity-based costing systems are true except they: Can provide more accurate product costs Are used in both manufacturing and non-manufacturing companies Are likely to have more overhead rates than volume-based systems Identify more costs as indirect costs than do traditional volume-based systems Are likely to be more time-consuming than volume-based systems

Solution

Activity based costing is a costing method which assigns overheads to products based on activities. It is a method of allocation of indirect cost. It is a refined method and thus provides greater accuracy. It is used in both manufacturing and non manufacturing company. It is not an average rate and thus more overhead rates are likely.It is time consuming. However, indirect costs do not change when activity based costing is deployed. The costs remain the same.

Thus, the fourth statement is not true.