Vanguard combines all manufacturing overhead into a single cost pool and allocates this overhead to products by using machine hours. Activity-based costing would likely show that with Vanguard's current procedures:
A)all of the company's products are undercosted.
B)the company's high-volume products are undercosted.
C)all of the company's products are overcosted.
D)the company's high-volume products are overcosted.
E)the company's low-volume products are overcosted.

Question

Quizplus · Accepted Answer

Activity-based costing (ABC) typically reveals that high-volume products are overcosted under traditional costing systems because these systems allocate overhead evenly, not reflecting the actual resources consumed by different products. High-volume products often consume less overhead per unit than low-volume products, leading to overcosting.

Vanguard Combines All Manufacturing Overhead into a Single Cost Pool