If Substantial Batch-Level or Product-Level Costs Exist, Then Overhead Allocation

question 40

Multiple Choice

If substantial batch-level or product-level costs exist, then overhead allocation based on a measure of volume such as direct labor-hours alone:

• A)is a key aspect of the activity-based costing model.
• B)will systematically overcost high-volume products and undercost low-volume products.
• C)will systematically overcost low-volume products and undercost high-volume products.
• D)must be used for external financial reporting since activity-based costing cannot be used for external reporting purposes.

---

Definitions:

Standard Deviation

A metric that quantifies the degree of spread or variability among values in a collection.

Variance

A statistical measure that indicates the dispersion or spread of a set of data points around their mean value.

Standard Deviation

A method for estimating the dispersion or the degree of spread within a range of values.

Mode

The most common number found in a set of data.