Which one of the following characteristics is associated with standard cost variance analysis for manufacturing overhead under a traditional versus an activity-based cost (ABC) system?

Multiple Choice

• The total manufacturing overhead variance will be the same under either system.

• The traditional cost system does not meet the current International Financial Reporting Standards for internal control and product costing.

• The traditional system, but not the ABC system, is acceptable for income tax purposes.

• Cost variances under an ABC system must be closed to cost of goods sold (CGS), while those calculated under a traditional system can also be prorated (allocated) to CGS and inventory accounts.

• Under both cost systems a flexible budget (FB) is used for control purposes.