Question

Activity based costing: Question 14 options: corrects the distortions built into product costing by the way that the learning curve is applied to direct labor costs. corrects the distortions built into product costing by the way that direct costs are allocated. eliminates nonvalue-adding activities; reduces activity occurrences, and reduces the cost driver rate. is important to cost accountants, but has little practical use for buyers. eliminates nonvalue-adding activities, increases activity occurrences, and increases the rate of return.

Answer 1

Answer: corrects the distortions built into product costing by the way that direct costs are allocated

Explanation:

Activity-based costing simply refers to a costing method whereby the activities in an organization are identified and then the cost of each activity are assigned to the products and services based on the actual consumption by each of the product.

It should be noted that in activity cost, more indirect costs are being assigned into the direct costs when it's being compared to the conventional costing. It corrects the distortions that are built into product costing through the allocation of the direct costs.