Discussion
Activity-based costing .................
Answer: C
Activity-based costing tends to increase the number of cost pools.
Instead of one or a few plant-wide overhead pools, ABC creates a separate cost pool for each significant activity, such as machine set-ups, purchasing, inspection and material handling, each with its own cost driver. The result is many more cost pools and more accurate product costs.
ABC can be used in both job order and process costing, so options A and B are wrong, and reducing the number of pools is the opposite of what it does.
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