In many cases, traditional, volume based product costing may overcost low-volume and complex products, while undercosting high-volume and relatively simple products.

Question

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Traditional, volume-based product costing tends to overcost high-volume, simple products and undercost low-volume, complex products because it allocates overhead costs based on volume measures (like labor hours or machine hours), not taking into account the additional complexity and resources required for producing low-volume, complex products.

In Many Cases, Traditional, Volume Based Product Costing May Overcost