Activity-based costing allocates selling and administrative expenses a. based on how each product consumes activities. b. in accordance with GAAP. c. based on sales volume in units. d. based on sales volume in dollars.

Activity-based costing (ABC) revolutionizes the way we look at expenses by tying them directly to the activities that drive costs, making option (a) the standout choice! Instead of a one-size-fits-all approach, ABC helps businesses understand the true cost of each product by analyzing how resources are used in production and selling, leading to better pricing and profitability strategies. In the world of real-world application, companies like Apple and Coca-Cola have embraced activity-based costing to fine-tune their pricing strategies and optimize their resources. By pinpointing specific activities that lead to costs, these companies can make smarter decisions, enhance efficiency, and ultimately deliver better products to consumers while keeping a keen eye on profitability.