Traditional Cost Systems with a Single-Allocation Base Tend to Overcost

question 159

True/False

Traditional cost systems with a single-allocation base tend to overcost high-volume products and undercost low-volume products as compared to activity-based costing systems.

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Definitions:

Piece Rates

A pay system where employees are compensated based on the amount of work completed, such as the number of items produced or tasks finished.

Piece Rate Systems

Compensation methods where employees are paid a fixed sum for each unit of production completed.

Base Pay

The initial rate of compensation that an employee receives in exchange for services. It excludes extra lump sum compensation or increases in the rate of pay for overtime or premium pay.

Merit Pay

Compensation increase awarded based on individual performance evaluation.