.Product unit costs computed using activity-based costing compared to product unit costs computed using a traditional costing approach will
A)sometimes be the same.
B)always be higher.
C)always be the same.
D)always be lower.

Question

Quizplus · Accepted Answer

Product unit costs computed using activity-based costing and traditional costing approach can sometimes be the same. The difference between the two approaches is the allocation of indirect costs. Traditional costing approaches allocate indirect costs based on direct labor hours or machine hours, which may not accurately reflect how those costs are incurred. Activity-based costing, on the other hand, allocates indirect costs based on the activities that consume those costs. In some cases, the allocation of indirect costs may be the same in both approaches, resulting in the same product unit costs. However, in cases where the allocation differs significantly between the two approaches, the product unit costs will differ as well.

Product Unit Costs Computed Using Activity-Based Costing Compared to Product