Answer (A) is correct.
ABC differs from traditional product costing because it uses multiple
allocation bases and therefore allocates overhead more accurately. The
result is that ABC often charges low-volume products with more
overhead than a traditional system. For example, the cost of machine
setup may be the same for production runs of widely varying sizes. This
relationship is reflected in an ABC system that allocates setup costs on
the basis of the number of setups. However, a traditional system using an
allocation base such as machine hours may underallocate setup costs to
low-volume products. Many companies adopting ABC have found that
they have been losing money on low-volume products because costs
were actually higher than originally thought.