C. To identify the most and least profitable activities.
Explanation:
Activity-Based Costing (ABC) is a costing method that assigns costs to products based on the resources they consume. Unlike traditional cost accounting, which typically allocates overhead costs based on direct labor hours or machine hours, ABC recognizes that not all overhead costs are driven by volume-related measures.
ABC first identifies the activities that consume resources within an organization, then assigns costs to those activities based on their usage. Finally, the costs of activities are allocated to products or services based on the extent to which they consume those activities.
Using ABC can provide more accurate information about the costs of products or services by linking costs more directly to the activities that cause them. This helps organizations make better decisions about pricing, product mix, process improvement, and resource allocation.
Message me for any questions.
