What Would One Expect to Occur When Cross Subsidies Are

question 37

Multiple Choice

What would one expect to occur when cross subsidies are eliminated with the use of activity-based costing (ABC) ?

• A) Lower-volume products pick up more of their fair share of overhead costs.
• B) Higher-volume products pick up more of their fair share of overhead costs.
• C) Lower-volume products will be determined as being unprofitable.
• D) Higher-volume products will be determined as being unprofitable.

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Definitions:

Demand Curve

A curve that illustrates the quantity of a product that consumers are willing and able to purchase at various prices, showing the inverse relationship between price and quantity demanded.

Levied

Imposed or collected, usually referring to taxes, duties, or other charges by an authority.

Demand Curve

A chart that illustrates the connection between a product's cost and the amount of the product customers are prepared to buy at different price levels.

Equilibrium Quantity

The amount of products or services available and sought at the balance price, where the supplied quantity matches the demanded quantity.