Final answer:
Overhead is greater for standard stanchions under the traditional costing system because it allocates costs based on volume-related measures, which may not accurately reflect actual resource consumption. The ABC system assigns costs based on activity consumption and offers a more accurate reflection of the production costs for different products.
Step-by-step explanation:
The reason overhead is assigned to standard stanchions using the traditional costing system to a greater extent than the Activity-Based Costing (ABC) system is due to the overhead allocation method used. The traditional costing system allocates overhead based on volume-related measures, such as direct labor hours or machine hours. These measures often do not accurately reflect the actual consumption of overhead resources by different products. In contrast, the ABC system assigns overhead costs based on activities that consume resources and is therefore more accurate for products that require different levels or types of activities.
Specifically, the traditional costing system can result in a distortion of the actual cost of producing a product, particularly for standard stanchions, which may use fewer diverse activities than more complex products. As a result, standard stanchions can appear to be more costly than they truly are under traditional costing. On the other hand, ABC more closely aligns costs with the actual activities used to produce different products, leading to a more nuanced and accurate cost assignment. It accounts for the non-volume based costs that are not proportionate to the number of units produced or hours worked.