McNair Company uses a traditional volume-based system for allocating overhead to products. Materials-related overhead costs are accumulated
Question:
An ABC study has revealed that materials-related overhead costs are driven by materials requisitions. Last year, a total of 40,000 materials requisitions were processed, of which 40 were for Product AA.
Required:
With respect to materials-related overhead only, calculate the traditional cost system's direction and amount of cost distortion for product AA.
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