XYE is in the process of evaluating different costing system What will occur if a company bases overhead allocation solely on volume?

Select one:

a.

High-volume products will be overcosted and low-volume products will be undercosted

b.

It is irrelevant because this is the sole basis of the activity-based costing model.

c.High-volume products will be undercosted and low-volume products will be overcosted.

d.

All of the above are correct.

There are two approaches to allocate overhead to products, traditional and activity based costing. In comparison with a traditional system that uses a single, volume-based cost driver, an activity-based costing system is preferred when a company has:

Select one:

a.a large proportion of nonunit-level activities.

b.a large proportion of nonunit-level activities and product-line diversity

c.existing variances from budgeted amounts.

d.product-line diversity.

e.minimal product-line diversity and a small proportion of nonunit-level activities.