Which of the following statements is true regarding cross-subsidies?
A) They occur when factory workers are trained to work on many different machines.
B) They occur when high-volume products are assigned more than their fair share of overhead costs.
C) They occur when high-volume products have more direct material and direct labour costs than overhead costs.
D) They occur when more than one cost driver can be determined for a particular overhead cost item.

Question

Quizplus · Accepted Answer

Cross-subsidies occur when high-volume products are assigned more than their fair share of overhead costs. This means that the profits from these products are used to subsidize the costs of lower-volume products, which may seem more expensive to produce when overhead costs are allocated evenly across all products.

Which of the Following Statements Is True Regarding Cross-Subsidies