Volume-Based Costing Allocates Indirect Product Costs Based on the Volume $\begin{array} {cc } & { \text { High-Volume Products } } & { \text { Low-Volume Products } } \\\end{array}$

question 119

Multiple Choice

Volume-based costing allocates indirect product costs based on the volume of output, using such allocation bases as direct labor hours, 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.
$\begin{array} {cc } & { \text { High-Volume Products } } & { \text { Low-Volume Products } } \\\end{array}$
A. $\begin{array} {cc } &&& \text { Overstates } &&&&&& \text { Overstates } \\\end{array}$
B. $\begin{array} {cc } &&& \text { Overstates } &&&&&& \text { Understates } \\\end{array}$
C. $\begin{array} {cc } &&& \text { Understates } &&&&&& \text { Overstates } \\\end{array}$
D. $\begin{array} {cc } &&& \text { Understates } &&&&&& \text { Understates } \\\end{array}$

• A) Option A
• B) Option B
• C) Option C
• D) Option D

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Definitions:

Transverse

Referring to a direction or plane that divides the body into upper and lower parts.

Anterior

Located towards the front of the body or an organ.

Posterior

Referring to the back or rear part of the body or structure.

Superior

Placed above or higher than another; often used to describe anatomical positioning.