Smith Company Has Developed the Following Information About Two Products

Multiple Choice

Smith Company has developed the following information about two products:
$\begin{array}{lll}& \text { Cost Per Unit } & \text { Cost Per Unit } \\\text { Approach } & \text { Product 1 } & \text { Product 2 } \\\text { Traditional } & \$ 5,400 & \$ 2,500 \\\mathrm{ABC} & \$ 6,000 & \$ 2,400\end{array}$
If managers believe the ABC approach is more accurate to cost products than the traditional approach,then ________.

A) the traditional approach underestimates the profitability of Product 1 and overestimates the profitability of Product 2
B) the traditional approach overestimates the profitability of Product 1 and underestimates the profitability of Product 2
C) the ABC approach underestimates the profitability of Product 1 and overestimates the profitability of Product 2
D) the ABC approach overestimates the profitability of Product 1 and underestimates the profitability of Product 2