Which of the following statements about overhead allocation based on volume alone is correct?
A) It is a key aspect of the activity-based costing model.
B) It will systematically overcost high-volume products and undercost low-volume products.
C) It will systematically overcost low-volume products and undercost high-volume products.
D) It must be used for external financial reporting.

Question

Quizplus · Accepted Answer

Overhead allocation based on volume alone tends to allocate more costs to high-volume products, leading to overcosting them, while low-volume products receive less overhead, leading to undercosting them.

Which of the Following Statements About Overhead Allocation Based on Volume