When a company implements activity-based costing, manufacturing overhead cost is often shifted from low volume products to high volume products, with a higher unit cost resulting for the high volume products.

Question

Quizplus · Accepted Answer

Activity-based costing (ABC) allocates overhead costs based on the actual activities that contribute to overhead, often resulting in more accurate product costing by assigning more costs to high complexity or low volume products that require more resources, rather than shifting costs to high volume products.

When a Company Implements Activity-Based Costing, Manufacturing Overhead Cost Is