Q1. Volume based costing allocates indirect product costs based on the volume of output, using such allocation bases as direct labor costs, machine hours, or the amount of direct material used in the production process. Activity based costing (ABC) has consistently shown that volume based costing _______ the cost of high volume products and ______ the cost of low volume products

1. High Volume Products overstates and Low Volume Products Overstates

2. High Volume Products overstates and Low Volume Products understates

3. High Volume Products understates and Low Volume Products Overstates

4. High Volume Products understates and Low Volume Products understates

A. 1

B. 2

C. 3

D. 4

Q2. What is the typical effect on the numbers of cost pools and cost assignment bases when an activity based costing (ABC) system replaces a traditional costing system?

1. Cost Pools has no effect and Cost assignment bases has no effect

2. Cost Pools increases and Cost assignment bases has no effect

3. Cost Pools has no effect and Cost assignment bases increases

4. Cost Pools increases and Cost assignment bases increases

A. 1

B. 2

C. 3

D. 4