) Which statement is true of activity-based costing?

A) In activity-based costing, direct labor-hours is always the best allocation base to allocate all non-manufacturing indirect costs.

B) Activity based costing is more suited to companies with high product diversity than companies with single product line.

C) Activity based costing broadly averages or spreads the cost of resources uniformly to cost objects such as products or services.

D) The main advantage of activity-based costing over peanut-butter costing is the accurate distribution of all direct costs to the products.

Answer the following questions using the information below: (#2-7)

A medical Company provides the following ABC costing information:

All Activities All Total Costs Activity-cost drivers

Account inquiry $200,000 10,000 hours

Account billing $140,000 4,000,000 lines

Account verification accounts $75,000 40,000 accounts

Correspondence letters $ 25,000 4,000 letters

Total costs $440,000

The above activities are used by Departments FAT and BUT as follows:

FAT Department BUT Department

Account inquiry hours 2,500 hours 4,000 hours

Account billing lines 400,000 lines 250,000 lines

Account verification accounts 10,000 accounts 8,000 accounts

Correspondence letters 1,200 letter 1,600 letters