Why do overhead costs often shift from high-volume products to low-volume products when a company switches from a conventional costing method to activity-based costing

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05-01-2021
Business

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Why do overhead costs often shift from high-volume products to low-volume products when a company switches from a conventional costing method to activity-based costing

Sagot :

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Parrainidn Parrainidn · Answer 1 · 2021-01-05T21:48:23-05:00

Answer:

When a company is using conventional costing methods, the costs are allocated based on volume so those products with a high volume will get a higher share of the costs.

When Activity-based costing is used however, costs are assigned more accurately which will lead to the actual products that are causing the costs incurring them instead of those high-volume products so it will appear as though overhead costs have shifted from high-volume products to low-volume products.

Sagot :

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