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Activity Based Costing

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If substantial batch-level or product-level costs exist, then overhead allocation based on a measure of volume such as direct labor-hours alone:

is a key aspect of the activity-based costing model.
will systematically overcost high-volume products and undercost low-volume products.
will systematically overcost low-volume products and undercost high-volume products.must be used for external financial reporting since activity-based costing cannot be used for external reporting purposes.

Correct - Your answer is correct.

Wrong - Your answer is wrong.

Detailed Answer

Correct answer: (B)

will systematically overcost high-volume products and undercost low-volume products.

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