Question

If the usage of project activities is not proportional to the number of units produced, then some managers will be overcharged and others undercharged under the:

A. Activity-based costing
B. Volume-based costing
C. Overhead costing
D. Process costing

Answer 1

Managers will be overcharged and undercharged under a Volume-based costing system when project activities usage is not proportional to units produced, as it allocates overhead based on volume rather than actual activity usage.

Step-by-step explanation:

If the usage of project activities is not proportional to the number of units produced, then some managers will be overcharged and others undercharged under the Volume-based costing system.

Volume-based costing allocates overhead costs based on a single measure of volume, like machine hours or direct labor hours, which does not take into account the actual consumption of the overhead resources by different activities.

In contrast, Activity-based costing (ABC) would be more accurate as it allocates costs based on actual activities that consume resources, but it is not the method described in the scenario provided.