Volume-Based Costing Allocates Indirect Product Costs Based on the Volume

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. $$\begin{array} { | c | c c | } \hline & \text { High Volume Products } & \text { Low } \text { Volume Products } \\\hline \text { A. } & \text { Overstates } & \text { Overstates } \\\hline \text { B. } & \text { Overstates } & \text { Understates } \\\hline \text { C. } & \text { Understates } & \text { Overstates } \\\hline \text { D. } & \text { Understates } & \text { Understates } \\\hline\end{array}$$

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