ExpertACCA · Question 04 · Specialist cost and management accounting techniques
Section A
MetroWater, a public utility company, is transitioning from traditional absorption costing to Activity-Based Costing (ABC) to better understand the costs of its water treatment, distribution, and customer service departments.
Which of the following statements regarding the implementation of ABC at MetroWater is true?
Section A
MetroWater, a public utility company, is transitioning from traditional absorption costing to Activity-Based Costing (ABC) to better understand the costs of its water treatment, distribution, and customer service departments.
Which of the following statements regarding the implementation of ABC at MetroWater is true?
Answer options:
ABC is simpler and cheaper to implement than traditional absorption costing.
ABC will provide more accurate product/service costs by recognizing that overheads are driven by activities rather than just production volume.
Under ABC, all costs are treated as variable in the short term.
ABC is only suitable for manufacturing companies and cannot be applied to a public utility.
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