Smith Company Has Developed the Following Information About Two Products

question 94

Multiple Choice

Smith Company has developed the following information about two products:
$\begin{array}{lll}& \text { Cost Per Unit } & \text { Cost Per Unit } \\\text { Approach } & \text { Product 1 } & \text { Product 2 } \\\text { Traditional } & \$ 5,400 & \$ 2,500 \\\mathrm{ABC} & \$ 6,000 & \$ 2,400\end{array}$
If managers believe the ABC approach is more accurate to cost products than the traditional approach,then ________.

• A) the traditional approach underestimates the profitability of Product 1 and overestimates the profitability of Product 2
• B) the traditional approach overestimates the profitability of Product 1 and underestimates the profitability of Product 2
• C) the ABC approach underestimates the profitability of Product 1 and overestimates the profitability of Product 2
• D) the ABC approach overestimates the profitability of Product 1 and underestimates the profitability of Product 2

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Definitions:

Major Organic Product

The primary substance formed in the greatest amount during a chemical reaction, especially in the context of organic chemistry.

Tetrahydrofuran

An organic compound, often abbreviated as THF, which is a cyclic ether with a formula of (CH2)4O, widely used as a solvent in organic synthesis.

HBr

Hydrogen bromide, a diatomic molecule consisting of hydrogen and bromine, used as a reagent in various chemical reactions.

1,4-Dibromobutane

1,4-Dibromobutane is an organic compound characterized by a four-carbon chain with bromine atoms attached to the first and fourth carbon atoms, used in various chemical syntheses.