When activity-based costing is implemented, the initial outcome is that
A)the unit cost of all products will be higher.
B)the unit cost of all products will be lower.
C)the unit cost of low-volume products will be higher and the unit cost of high-volume products will be lower.
D)the unit cost of low-volume products will be lower and the unit cost of high-volume products will be higher.

Question

Quizplus · Accepted Answer

Activity-based costing takes into account the resources used in producing a product, including indirect costs that are often overlooked in traditional costing methods. Low-volume products require more specialized resources and a greater allocation of indirect costs, resulting in a higher unit cost. High-volume products, on the other hand, require less specialized resources and a lower allocation of indirect costs, resulting in a lower unit cost. Overall, this means that the unit cost of low-volume products will be higher and the unit cost of high-volume products will be lower.

When Activity-Based Costing Is Implemented, the Initial Outcome Is That