In a manufacturing operation that produces more than one product, the method of cost allocation chosen can have a major impact on which of the following?
A) The total cost of raw materials.
B) The unit cost of each product.
C) Conversion costs.
D) The method of allocation has no impact because the total manufacturing costs will still be the same.

Question

Quizplus · Accepted Answer

The method of cost allocation chosen can have a major impact on the unit cost of each product. This is because different methods of cost allocation can result in different amounts of manufacturing overhead being allocated to each product. This, in turn, can impact the unit cost of each product and potentially impact pricing decisions and profitability.

In a Manufacturing Operation That Produces More Than One Product