Question

LO 6.4Which statement is correct?

Activity-based cost systems are less costly than traditional cost systems.
Activity-based cost systems are easier to implement than traditional cost systems.
Activity-based cost systems are more accurate than traditional cost systems.
Activity-based cost systems provide the same data as traditional cost systems.

Answer 1

Correct statement is: Activity-based cost systems are more accurate than traditional cost systems.

Step-by-step explanation:

Companies need two types of accounting systems to track or follow the costs of their operations. These are: traditional costing and activity-based costing.

Activity based costing systems provide more exact breakdown of indirect costs. So, they are more perfect than traditional costing systems. But they are complex and even costlier to implement than the traditional costing systems. Traditional costing systems are simpler and easier to implement.

Companies usually use traditional costing system for external reports as they are simpler to understand for an outsider.