Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Switch from absorption costing to activity based costing
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LMR1006.
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- April 14, 2025 at 6:36 am #716663
A company produces a range of products and uses an absorption costing system. Which two of the following are unlikely to be a consequence of the company switching to an activity based costing (ABC) system?
Which two of the following are unlikely to be a consequence of the company switching to an activity-based costing (ABC) system?
Indirect overheads will be shared between products on fairer bases.
Product pricing decisions will be improved.
The prime production cost of each product will fall.
Cost control on indirect overheads will be harder to achieve.
Total production cost of each product will change.I dont understand, how will total production cost of each product change? The rest of the options – I do understand.
April 14, 2025 at 10:33 pm #716751The total production cost of each product is likely to change due to the more accurate allocation of overhead costs based on the actual activities that drive those costs, leading to a better understanding of the true costs associated with each product.
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