In traditional-based costing, overheads are apportioned based on one volume measure, whereas in activity-based costing, overheads are apportioned according to cost drivers.

Question

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Traditional-based costing uses a single volume measure, such as direct labor hours, to allocate overhead costs while activity-based costing allocates overhead costs based on multiple cost drivers, such as the number of setups, machine hours, or production runs.

In Traditional-Based Costing, Overheads Are Apportioned Based on One Volume