EXERCISE 8-21 (CONTINUED)

2. The unit product cost of a high-volume product made in large batches

with automated equipment and few direct labor-hours will typically go

up under activity-based costing. Because of the low direct labor-hour

requirement for the product, the unit product cost under a traditional di-

rect labor-based costing system would be artificially low. Under an activ-

ity-based costing system, the product would be charged for its use of

automated equipment and for batch-level and product-level costs.