Question

An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because: A. some manufacturing costs (i.e., the costs of idle capacity and organization-sustaining costs) will not be assigned to products. B. some nonmanufacturing costs are assigned to products. C. first-stage allocations may be based on subjective interview data. D. all of these are reasons why an activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles.

Answer 1

Answer: The correct answer is "D. all of these are reasons why an activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles.".

Explanation: The ABC system obtains enough information to understand what the true inducers of costs are and act on them.

This system is based on the fact that the products consume activities and the activities resources (costs). Thus, if you have information on what each activity costs and what activities are necessary for the generation of each product, then you can know how much each product costs from the activities that constitute it, and so you can make an evaluation of the ability to generate value of these activities and an analysis of the processes to eliminate those unnecessary activities that do not add value to the product.