Question

General Mattress Company makes Memory Foam mattresses, a mass-market high-volume product, and Magnetic Levitation mattresses, a premium low-volume product. The company uses a traditional cost allocation with a single cost pool. It is planning to implement activity-based costing (ABC). After implementing ABC, the company will likely find that the traditional cost allocation: Group of answer choices

Answer 1

Answer is explained in the explanation section below.

Step-by-step explanation:

First of all, this question is not complete and lacks the group of answer choices. However, I have found that question with complete options on the internet.

So,

The Correct option is: D

Option D = Not enough information

Reasoning:

For overestimated or underestimated or not full information required i.e. cost under traditional method and cost under activity based cost method , both information required for compare methods cost under each method.

Under Activity base costing all indirect cost is applied as per activities use by each product but under traditional method only one key factor use for applied overheads i.e. direct labor hours or machine hours etc.