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In an activity-based costing (ABC) system, cost reduction is accomplished by identifying and eliminating C` A
In an activity-based costing (ABC) system, cost reduction is accomplished by identifying and eliminating C` A. All Cost Drivers- No Non value-Adding Activities- No ? B. All Cost Drivers- Yes Nonvalue-Adding Activities-Yes C' C. All Cost Drivers- No Nonvalue-Adding Activities- Yes ? D. All Cost Drivers- Yes Nonvalue-Adding Activities- No
Expert Solution
The correct option is C "No -All cost drivers, Yes - Non value added activities". It is a system where all the costs are allocated to each product or each department on the basis of activity drivers. Non value adding activities are those which do not add any value in the activity, so they are identified and eliminated. Cost drivers are not eliminated rather they are allocated on activity basis.
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