alleryStart learning →Broad overhead percentages on common costs risk what outcome among products?
ALower total unit cost
BFaster production runs
CCross-product subsidy
DZero overhead cost
Answer & Solution
Correct answer: C. Cross-product subsidy
A uniform on-cost ignores differing use of resources, so some products pay for the overhead caused by others.
Keep practising Total Absorption Costing
Browse all Total Absorption Costing questions for CA Inter, or explore more Cost and Management Accounting topics.
Related questions
In the CIMA description of ABC, activities are assigned to what?In which journal did Cooper and Kaplan publish ABC articles from 1988?Drucker said ABC also records the cost of what?What limits the use of ABC, especially in services?What is a danger of ABC, like other cost allocation approaches?The chief executive's salary stays unassigned in ABC. What are such costs termed?Why did indirect costs rise relative to direct costs in modern factories?How does ABC assign costs, rather than using broad arbitrary percentages?