Concept explainers
Activity Based Costing:
Method of recognizing activities in the organization and allotment of cost of each activity thereto is known as activity based costing.
To explain: In comparison to traditional cost system and when there are batch level or product level costs, an activity based costing system shifts costs.
Explanation of Solution
b.
Usually activity based costing system shifts costs from high volume to low volume products due to usage of product level or batch level.
Hence, option b is correct.
a.
cost gets shifted low volume to high volume products in traditional methods due to usage of direct labor hours or machine hours.
c.
Shifting of cost from standardized to specialized products under activity based costing is not taken into accounts due to less usage of it.
d.
Activity based costing system does not facilitates specialized to standardized products due to non emphasizing on it, rather this considers product level.
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