Which of the following statements is (are)true? (1)Activity-based costs per unit are always greater than volume-based costs per unit.(2)Volume-based costing has typically resulted in lower gross margins for high volume products and higher gross margins for low volume products.
A)Only 1 is true.
B)Only 2 is true.
C)Both 1 and 2 are true.
D)Neither 1 nor 2 is true.

Question

Quizplus · Accepted Answer

Activity-based costing aims to allocate costs more accurately by identifying all activities involved in the production process and assigning costs to each activity, whereas volume-based costing assigns costs to products based on a predetermined overhead rate. Therefore, activity-based costs per unit can be higher or lower than volume-based costs per unit depending on the complexity of the production process.

Volume-based costing generally results in higher gross margins for high volume products and lower gross margins for low volume products. This is because the predetermined overhead rate becomes more accurate as volume increases, resulting in lower cost per unit and higher profit margins for high volume products. Conversely, the predetermined overhead rate is less accurate for low volume products, resulting in higher cost per unit and lower profit margins.

Which of the Following Statements Is (Are)true? (1)Activity-Based Costs Per