EXERCISE 8-21 (CONTINUED)

3. The unit product cost of a high-volume product that requires little ma-

chine work but a lot of direct labor typically will decrease under activity-

based costing. Because of the high direct labor-hour requirement for the

product, the unit product cost under a traditional direct labor-based

costing system would be artificially high. The activity-based costing sys-

tem would shift some of the overhead costs that had been assigned to

this product to other products that are made in smaller volumes.