alleryStart learning →Moving to activity-based costing tends to change the per-unit cost of low-volume products how?
AIt abolishes them
BIt postpones them
CIt duplicates them
DIt increases them
Answer & Solution
Correct answer: D. It increases them
1. Low-volume products consume batch and product level work out of proportion to their units.
2. ABC assigns unit-level, batch-level, product-level and factory-level costs separately.
3. That can increase the per-unit costs of the low-volume products.
4. The per-unit costs of the high-volume products fall to match.
_Source: OpenStax Principles of Accounting Volume 2, Managerial Accounting (CC BY-NC-SA 4.0), Ch 6 'Activity-Based, Variable, and Absorption Costing', sections 6.1-6.5_
Keep practising Activity-Based Costing
Browse all Activity-Based Costing questions for US CMA Part 1, or explore more Management Accounting topics.
Related questions
Work the per-unit numbersAbsorption or variableTraditional versus ABCSort costs by their levelOrder the five ABC stagesOne stated disadvantage of activity-based costing is that the method is:When the entire finished goods inventory is sold, net income under the two methods is:Fixed overhead is $12,000 and 10,000 units are made. Under absorption costing each unit ca