Question: When overhead is properly assigned in ABC, it will usually increase the unit cost of low-volume products like the force field enhancers. This is because

  1. When overhead is properly assigned in ABC, it will usually increase the unit cost of low-volume products like the force field enhancers. This is because low-volume products often require more special handling, such as machine setups and inspections, than high-volume products. Also, overhead costs incurred by low-volume products often are disproportionate to a traditional allocation base.

Required:

What are the conditions that would indicate to the management of a firm that they should switch from traditional costing to activity-based costing?

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