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In a manufacturing firm, allocation of indirect costs based on direct labor-hours or machine hours:
A. Is a key aspect of the activity-based costing model.
B. Will systematically over-cost high-volume products and under-cost low-volume products.
C. Will systematically over-cost low-volume products and under-cost high-volume products.
D. Must be used for external financial reporting.
E. None of the above.
Why is it B and what is volume bias?
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