A company produces three products; if one product is undercosted then:
A)one product is overcosted.
B)one or two products are overcosted.
C)two products are overcosted.
D)no products are overcosted.

Question

Quizplus · Accepted Answer

If one product is undercosted, it means that the cost of producing that product was underestimated. This could be due to several reasons such as incorrect allocation of overhead or underestimation of material costs. However, this would result in the overall cost of production being less than what it actually should be. Therefore, to maintain the overall profitability of the company, the cost of production of one or two products would have to be overstated to compensate for the undercosted product.

A Company Produces Three Products; If One Product Is Undercosted