Question

When switching from a traditional costing system to an activity-based costing system that contains some batch-level costs:__________.


A. the unit product costs of both high and low volume products typically increase.

B. the unit product costs of both high and low volume products typically decrease.

C. the unit product costs of high volume products typically increase and the unit product costs of low volume products typically decrease.

D. the unit product costs of high volume products typically decrease and the unit product costs of low volume products typically increase.

Answer 1

Answer:

The correct answer is letter "D": the unit product costs of high volume products typically decrease and the unit product costs of low volume products typically increase.

Explanation:

Activity-Based Costing is a managerial accounting method that assigns certain indirect costs to the products incurring the bulk of those costs. Activity-Based Costing is primarily used in the manufacturing sector to make a better calculation of the real cost of production per unit. Unit product costs of high-volume products typically decrease and unit product costs typically increase with low-volume products after adopting the activity-based costing system.