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When Does Product Cross-subsidization Occurs-Multiple Choice Question

Question

Product cross-subsidization occurs when:

  1. a high volume, low complexity product is overcosted, while a low volume, high complexity product is undercosted
  2. activity based costing is used instead of volume based costing
  3. both preliminary and primary stage cost drivers are used
  4. unit level activities are misclassified as batch level activities
  5. companies produce products that are very similar to one another.

 

 

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