As product diversity and indirect costs increase, it is usually best to switch away from a broad averaging system to an activity-based cost system.

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Quizplus · Accepted Answer

An activity-based cost system is better suited to handle increasing product diversity and indirect costs because it allocates costs based on specific activities related to the product or process. This provides a more accurate cost analysis compared to a broad averaging system, which may not accurately reflect the cost of each product or process.

As Product Diversity and Indirect Costs Increase, It Is Usually