Unit-level measures can distort product costing because the demand for overhead resources may be driven by batch-level or product-sustaining activities.

Question

Quizplus · Accepted Answer

Unit-level measures allocate overhead costs based on the number of units produced, which can lead to distorted product costing if the demand for overhead resources is actually driven by batch-level or product-sustaining activities that are not directly related to the number of units produced. This can result in over- or under-estimation of product costs, which can impact pricing and profitability decisions.

Unit-Level Measures Can Distort Product Costing Because the Demand for Overhead