Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 21

“Undercosting a product increases the profit from the product and benefits the firm.” Do you agree? Why?

Step 1 of 3

Under costing:

Under costing refers to the allocating less amount of overhead to a product than it actually utilize and hence, lead to the overall under costing of the product.

Under costing is due to the less apportionment of overhead cost because these costs are not directly traceable to the product. Under costing can rarely happen in case of direct cost because these can be easily traceable.