Question
A company manufacturers two products: product A and product B. The company expects to make 100 units of product A and 50 units of product
A company manufacturers two products: product A and product B. The company expects to make 100 units of product A and 50 units of product B in the upcoming period. The company currently uses a traditional costing system to allocate MOH to the product lines but is considering switching to ABC to improve costing accuracy. In analyzing the numbers, it is determined that the traditional costing system is overcosting product A by $2 per unit. Answer the following questions:
1. Is product B being overcosted or undercosted by the traditional costing system? Explain in words.
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