When a Company Changes from a Traditional Cost System in Which

question 82

True/False

When a company changes from a traditional cost system in which manufacturing overhead is applied based on direct labor-hours to an activity-based costing system in which there are batch-level and product-level costs, the unit product costs of high-volume products typically increase whereas the unit product costs of low-volume products typically decrease.

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Definitions:

Cross-elasticity of Demand

A measure of how the quantity demanded of one good responds to a change in the price of another good, indicating substitutes or complements.

Normal Goods

Items for which demand increases as consumer income rises, showing a positive correlation between income and demand.

Law of Supply

A fundamental principle stating that, all else being equal, an increase in the price of a good will result in an increase in the quantity supplied.

Price-elasticity of Supply Coefficient

A numerical measure of how much the quantity supplied of a good responds to a change in its price.