The traditional approach to cost allocation
A)tends to over-cost high volume core products.
B)usually requires more cost pools than ABC.
C)attempts to identify the activities that cause costs.
D)produces more accurate costs than other allocation methods.

Question

Quizplus · Accepted Answer

The traditional approach tends to over-cost high volume core products because it allocates indirect costs based on volume-based allocation factors such as direct labor hours or machine hours. High volume products tend to use more of these allocation factors and therefore absorb a larger portion of indirect costs, leading to over-costing.

The Traditional Approach to Cost Allocation