Volume-based cost systems tend to:
A)under-cost low-volume products and under-cost high-volume products.
B)under-cost low-volume products and over-cost high-volume products.
C)over-cost low-volume products and under-cost high-volume products.
D)over-cost low-volume products and over-cost high-volume products.

Question

Quizplus · Accepted Answer

Volume-based costing systems typically allocate overhead costs based on a single volume measure, such as labor hours or machine hours. This method tends to over-cost high-volume products because they are allocated more overhead costs due to their higher production volumes. Conversely, it under-costs low-volume products because they are allocated fewer overhead costs, not accurately reflecting the complexity or additional resources they may require.

Volume-Based Cost Systems Tend To