For a company with diverse products,undercosting overhead of a product will lead to ________.
A) misallocating direct labor costs of the product.
B) misallocating direct material costs of the product
C) misallocating indirect costs of another product
D) misallocating direct costs of another product

Question

Quizplus · Accepted Answer

When overhead costs are undercosted for a product, it means that some indirect costs that should have been allocated to that product were not accounted for. As a result, these costs are misallocated to other products, leading to an overallocation of indirect costs to them. This can lead to distorted product costs and poor decision-making. Therefore, misallocating indirect costs of another product is the best choice.

For a Company with Diverse Products,undercosting Overhead of a Product