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.

Understand the calculation of total contribution margin under variable costing.

Understand how operating decisions affect net operating income and break-even points.

Understand the concept of variable costing and its calculation.

Understand the concept of absorption costing and its calculation.

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Definitions:

Lesion

Any abnormal tissue in or on the body, normally caused by disease or injury.

Agnosia

A neurological disorder characterized by the inability to recognize and process sensory information, despite having intact sensory functions.

Sensory Deficit

A reduction or impairment in the ability to perceive stimuli through one's senses, such as sight, hearing, smell, taste, or touch.

Voluntary Action

Actions that are performed as a result of conscious choice or decision, under the control of an individual's will.