What can be caused by using only unit-based activity drivers to assign non-unit-related manufacturing overhead costs?
A) efficiency
B) activity sharing
C) product diversity
D) distorted product costs

Question

Quizplus · Accepted Answer

Using only unit-based activity drivers to assign non-unit-related manufacturing overhead costs can distort product costs as it fails to consider other factors that contribute to overhead costs. For instance, if a company allocates all overhead costs based on units produced, products that require more machine hours or setups to produce will have higher costs assigned to them even if they are more profitable. As a result, it can lead to incorrect pricing and profitability analysis.

What Can Be Caused by Using Only Unit-Based Activity Drivers