Unit-level cost drivers in traditional cost systems distort product costs because they:
A)assume that all overhead activities affect all products.
B)recognize specific activities that are required to produce a product.
C)do not consistently record costs.
D)fail to measure the correct amount of total costs for all products.

Question

Quizplus · Accepted Answer

Unit-level cost drivers in traditional cost systems assume that all overhead activities affect all products, which can distort product costs. This can result in overcosting some products and undercosting others, leading to inaccurate decisions about pricing, production, and profitability. Recognizing specific activities that are required to produce a product (option B) can help to improve the accuracy of cost allocations, but it does not address the issue of unit-level cost drivers. Options C and D are not accurate descriptions of unit-level cost drivers in traditional cost systems.

Unit-Level Cost Drivers in Traditional Cost Systems Distort Product Costs