When Switching from a Traditional Costing System to an Activity-Based

question 217

Multiple Choice

When switching from a traditional costing system to an activity-based costing system that contains some batch-level costs:

• A) the unit product costs of both high and low volume products typically increase.
• B) the unit product costs of both high and low volume products typically decrease.
• C) the unit product costs of high volume products typically increase and the unit product costs of low volume products typically decrease.
• D) the unit product costs of high volume products typically decrease and the unit product costs of low volume products typically increase.

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Definitions:

Labor Intensive

A process or industry that requires a large amount of labor to produce its goods or services, often resulting in higher labor costs.

Machine Intensive

A production process that heavily relies on machinery and equipment rather than manual labor for manufacturing goods or services.

Predetermined Overhead Rates

Rates used to apply manufacturing overhead to products that are calculated in advance based on estimated costs and activity levels.

Ending Inventory

is the total value of goods available for sale at the end of an accounting period, after accounting for sales and additions during the period.