alleryStart learning →How does activity-based costing relate to job order costing and process costing?
AIt replaces both of them entirely
BIt is combined with the other two
CIt applies only to service firms
DIt is used before either of them
Answer & Solution
Correct answer: B. It is combined with the other two
1. Job order costing and process costing are the two methods of systematically accumulating costs on manufactured products.
2. Activity-based costing is a system combined with those two methods.
3. Its purpose is to identify and measure costs more specifically than either method does alone.
4. It therefore adds to the other two rather than replacing them.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 1.1 Introduction_
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