Volume-Based Costing Allocates Indirect Product Costs Based on the Volume $\begin{array} {cc } & { \text { High-Volume Products } } & { \text { Low-Volume Products } } \\\end{array}$

Multiple Choice

Volume-based costing allocates indirect product costs based on the volume of output, using such allocation bases as direct labor hours, machine hours, or the amount of direct material used in the production process. Activity-based costing (ABC) has consistently shown that volume-based costing ________ the cost of high-volume products and ________ the cost of low-volume products.
$\begin{array} {cc } & { \text { High-Volume Products } } & { \text { Low-Volume Products } } \\\end{array}$
A. $\begin{array} {cc } &&& \text { Overstates } &&&&&& \text { Overstates } \\\end{array}$
B. $\begin{array} {cc } &&& \text { Overstates } &&&&&& \text { Understates } \\\end{array}$
C. $\begin{array} {cc } &&& \text { Understates } &&&&&& \text { Overstates } \\\end{array}$
D. $\begin{array} {cc } &&& \text { Understates } &&&&&& \text { Understates } \\\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D