Why do traditional cost systems distort product costs?
A)Competitive pricing is ignored
B)They apply average support costs to each unit of product
C)They emphasise financial accounting requirements
D)They do not know how to identify the appropriate units

Question

Quizplus · Accepted Answer

Traditional cost systems apply average support costs to each unit of product, which can distort the actual product costs. This method assumes that each unit of product consumes an equal amount of indirect costs, which is not always the case. As a result, some products may be overcosted, while others are undercosted, leading to inaccurate pricing decisions and possible loss of profits.

Why Do Traditional Cost Systems Distort Product Costs