Which of the following types of characteristics tend to cause too little overhead costs to be charged to the product using traditional cost allocations?
A)a relatively small product.
B)a relatively low volume product.
C)a relatively simple product.
D)a and b.

Question

Quizplus · Accepted Answer

Traditional cost allocation methods often allocate overhead based on volume-related measures, such as labor hours or machine hours. Therefore, products that are small or have low volume may not absorb their fair share of overhead costs, leading to too little overhead being charged to these products. Simple products, however, are not specifically related to the allocation issue described, as complexity does not directly impact volume-based allocation methods.

Which of the Following Types of Characteristics Tend to Cause