Final answer:
Activity-based costing (ABC) results in more accurate product costing, particularly for low-volume products, by more precisely allocating overheads and recognizing the true cost and profit margins.
Step-by-step explanation:
The use of activity-based costing (ABC) normally results in more accurate product costing for low-volume products. This is Option 4. ABC accounts for the actual resources consumed by each product or service, which tends to show that low-volume products, which may require special attention or consume disproportionate resources, actually cost more to produce than previously calculated under traditional costing methods. This means companies are better able to allocate overheads more precisely and thus recognize the true cost and profit margins of their products.
On the contrary, high-volume products generally benefit from economies of scale, leading to a lower cost per unit as production increases. Recognizing these economies of scale helps in setting selling prices that are competitive yet profitable. It is important to surpass the break-even point where the selling price exceeds both the average variable costs and total average costs to avoid losses and maintain sustainable operations.