Book Co. uses the activity-based costing approach for cost allocation and product costing purposes.  Printing, cutting, and binding functions make up the manufacturing process.  Machinery and equipment are arranged in operating cells that produce a complete product starting with raw materials.  Which of the following are characteristic of Book’s activity-based costing approach?

I.
Cost drivers are used as a basis for cost allocation.
II.
Costs are accumulated by department or function for purposes of product costing.
III.
Activities that do not add value to the product are identified and reduced to the extent possible.
　　A. I only.
　　B. I and II.
　　C. I and III.
　　D. II and III.
　　Answer:C
　　C is corrent because an activity-based costing system allocates costs to products by determining which activities performed by the entity drive the costs. An activity-based costing approach differs from traditional costing methods which accumulate costs by department or function. Activity-based costing accumulates costs by the specific activities being performed--printing, cutting, and binding in this case. By analyzing the activities of the entity, activities which do not add value to the product can be identified and reduced or eliminated.
　　A is incorrect because activity based costing allocates costs based on activities using cost drivers.  Activities that do not add value are eliminated or minimized.
　　B is incorrect because activity-based costing allocates costs based on activities using cost drivers.  Activities that do not add value are eliminated or minimized.
　　D is incorrect because activity-based costing allocates costs based on activities using cost drivers.  Activities that do not add value are eliminated or minimized.