The averagecost data are for In-Sync Fixtures Company’s (a retailer) only two product lines, Marblette and Italian Marble. Marblette Italian Marble Purchase volume 20,000 1,000 Purchase cost per unit $50 $50 Shipments received 12 12 Hours used per shipment* 5 3 * These data were accumulated aftera careful activity analysis. Currently, In-Sync Fixtures uses a traditional costing system withindirect costs allocated using purchased cost of goods as a basis. In-SyncFixtures is considering refining the allocation of their receiving costs of$40,000. They realize that the Italian Marble is heavier and requires more carethan the Marblette but that the Marblette comes in larger volume. Which statement can be made using the results of the activity analysis performed by In-Sync Fixtures?
A.
The use of this refined activity-based costing system will increase the accuracy of the resulting product costs because a more appropriate cost driver will be used as theallocation base.
B.
The traditional allocation method currently being used is causing product-cost cross-subsidization with the product line Marblette being undercosted.
C.
The cost allocated to the Italian Marble product line under the current traditional system is more than the activity-based costing allocated cost.
D.
The use of this refined activity-based costing system will increase the accuracy of the resulting product costs because it probably will cost less to trace the costs to the product lines.