When using a single cost driver to allocate overhead costs, the amount of overhead costs that are applied is
A)usually greater for low-volume products than for high-volume products.
B)usually greater for high-volume products than for low-volume products.
C)usually equal for both low and high-volume products.
D)sometimes greater for higher-volume products, and sometimes greater for low-volume products.

Question

Quizplus · Accepted Answer

When using a single cost driver to allocate overhead costs, the amount of overhead costs applied is usually greater for high-volume products than for low-volume products. This is because the cost driver used to allocate overhead costs is typically a measure of volume (e.g. machine hours or labor hours), and high-volume products tend to use more of these resources than low-volume products. As a result, the overhead costs allocated to high-volume products will be higher than those allocated to low-volume products.

When Using a Single Cost Driver to Allocate Overhead Costs