Define "cross subsidies" and tell what kind of product costing system is likely to have them. What happens to cross subsidies in activity-based costing (ABC)?
Cross subsidies occur in traditional product costing when the cost driver is volume-based. A cross subsidy occurs when a high-volume product is assigned more than its fair share of overhead costs as opposed to a low-volume product. Cross subsidies will result in less accurate product cost information for both types of products. When a company implements ABC, greater accuracy in product cost allocation will greatly reduce and possibly eliminate cross subsidies.
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I hope to hear from you soon is an effective closing for a cover message
Indicate whether the statement is true or false
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What will be an ideal response?