Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 14 - Managerial Accounting - Self-Test Questions - Page 778: 14

Answer

D - activity-based costing

Work Step by Step

Activity-based costing (“ABC”) is a managerial accounting technique which is a more effective way of allocating overhead costs to products. Traditional costing methods use only one, company-wide cost pool that allocates overhead evenly across all products. ABC assigns costs to different cost pools, and ultimately leads to a more accurate unit cost.
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