Economics · Cost Accounting
Which of the following is the most likely reason for an organisation to transition from a traditional absorption costing system to Activity-Based Costing (ABC)?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The company's production volume is declining rapidly across all segments.
- 2Overhead costs constitute a high proportion of total product costs, and the product range is diverse.✓
- 3Direct labour costs represent a significant proportion of total product costs.
- 4The company sells a single, high-volume, homogenous product.
Correct answer
Overhead costs constitute a high proportion of total product costs, and the product range is diverse.
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