When a company shifts from a traditional cost system in which manufacturing overhead is applied based on direct labor-hours to an activity-based costing system with batch-level and product-level costs, the unit product costs of low volume products typically decrease whereas the unit product costs of high volume products typically increase.

Question

Quizplus · Accepted Answer

In an activity-based costing system, low volume products often have higher unit costs due to the allocation of batch-level and product-level costs, while high volume products typically have lower unit costs as these costs are spread over a larger number of units.

When a Company Shifts from a Traditional Cost System in Which