Cost distortion results in the
A) overcosting of all products.
B) undercosting of all products.
C) overcosting of some products and undercosting of other products.
D) accurate costing of all products.

Question

Quizplus · Accepted Answer

Cost distortion occurs when the actual costs incurred by a company are not accurately assigned to products, resulting in overcosting for some products and undercosting for others. This can happen due to various reasons such as allocation and apportionment of indirect costs, inaccurate costing methods, or incorrect assumptions about cost behavior. As a result, the cost of some products may be inflated, while others may be understated, leading to incorrect decision-making and financial performance assessment. Therefore, option C is the best answer.

Cost Distortion Results in the