Bard Inc. is currently comparing a potential implementation of Activity-Based Costing (ABC) with their current use of traditional costing and comparing the results. Bard creates two products: Candy Bars, 60,000 units; and lollipops, 82,000 units. Under ABC, Manufacturing Overhead (MOH) is allocated at $43,877.44 to candy bars and $32,781.90 to lollipops. Under traditional costing, MOH is allocated at $46,707.87 to candy bars and $29,915.47 to lollipops. Which of the following statements is correct?
A) Unit cost will be higher for lollipops under traditional costing than ABC.
B) Unit cost will be lower for candy bars under ABC than traditional costing.
C) Unit cost will be lower for candy bars under traditional costing than ABC.
D) Unit cost will be lower for lollipops under ABC than traditional costing.

Question

Quizplus · Accepted Answer

This question requires consideration of how allocated MOH will impact other items under both traditional costing and ABC. Choice B is accurate because an understated unit cost would lead to a higher or overstated profit.

Bard Inc Is Currently Comparing a Potential Implementation of Activity-Based Costing