The correct answer is: B. activity based costing
Activity-based costing (ABC) is a costing methodology that identifies and assigns indirect costs to cost objects based on the activities that consume them. This differs from traditional costing methods, which assign indirect costs to cost objects based on volume-based allocation bases, such as direct labor hours or machine hours.
ABC is a more accurate costing methodology than traditional costing methods because it more accurately reflects the costs of activities that consume resources. This can lead to more accurate product costing, which can in turn lead to more accurate pricing and profitability decisions.
Here is a brief explanation of each option:
- A. Manufactured costing is a costing system that is used to track the costs of manufacturing products. It includes direct materials, direct labor, and manufacturing overhead costs.
- B. Activity based costing is a costing system that identifies and assigns indirect costs to cost objects based on the activities that consume them.
- C. Allocation costing is a costing system that assigns indirect costs to cost objects based on a predetermined allocation base.
- D. Base costing is a costing system that uses a single cost driver to assign indirect costs to cost objects.