ABC tends to increase the unit cost of low-volume products and decrease the unit cost of high-volume products.

Question

Quizplus · Accepted Answer

This is one of the main advantages of using ABC costing. By allocating indirect costs based on the activities involved in producing a product, it becomes more clear how much each product is really costing to make. As a result, high-volume products are likely to receive a smaller indirect cost allocation per unit than low-volume products, making them more profitable. Conversely, low-volume products are likely to receive a higher indirect cost allocation per unit, making them less profitable.

ABC Tends to Increase the Unit Cost of Low-Volume Products