Asked by Kanisha Branner on Jul 06, 2024
Verified
When a company changes from a traditional costing system to an activity-based costing system, the unit product costs of low-volume products typically increase more than the unit product costs of high-volume products decrease.
Traditional Costing System
A costing methodology that allocates overhead costs to products based on a predetermined rate, often using direct labor hours or machine hours as the allocation base.
Activity-Based Costing System
A costing methodology that assigns costs to products or services based on the activities that go into producing them, providing detailed insights into the actual consumption of resources.
Unit Product Costs
The calculated cost of producing one unit of a product, including direct materials, labor, and overhead.
- Identify the effects on product costs when transitioning from traditional costing methods to activity-based costing.
- Identify the methodical redistribution of expenses between products of high volume and those of low volume within an activity-based costing framework.
Verified Answer
Learning Objectives
- Identify the effects on product costs when transitioning from traditional costing methods to activity-based costing.
- Identify the methodical redistribution of expenses between products of high volume and those of low volume within an activity-based costing framework.
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