Johnson Manufactures Products X and Y, Applying Overhead on the Basis

Multiple Choice

Johnson manufactures products X and Y, applying overhead on the basis of labor hours. X is a high-volume product and relatively simplistic in nature. Y is both a low-volume product and requires a variety of complex manufacturing procedures. What would an activity-based costing system likely disclose about products X and Y as a result of Johnson's current accounting procedures? $\begin{array}{lll}&X&Y\\\text { A. } & \text { Undercosted } & \text { Undercosted } \\\text { B. } & \text { Undercosted } & \text { Overcosted } \\\text { C. } & \text { Overcosted } & \text { Undercosted } \\\text { D. }&\text { Overcosted } & \text { Overcosted } \\\text { E. } & \text { Costed correctly } & \text { Costed correctly }\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E