Costing system distortions relate to the handling of indirect costs.

Question

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Costing system distortions occur due to the mishandling or incorrect allocation of indirect costs in the cost calculation process. Indirect costs are those costs that cannot be directly traced to a specific product or service, and their allocation can vary depending on the costing system used. Incorrect allocation of indirect costs can lead to distorted product costs and affect pricing decisions, profitability analysis, and overall financial performance.

Costing System Distortions Relate to the Handling of Indirect Costs