The practice of assigning the costs of idle capacity to products can result in unstable unit product costs

Question

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Assigning the costs of idle capacity to products can result in unstable unit product costs because it allocates fixed costs to varying levels of production, leading to fluctuating unit costs. By using a first-stage allocation to assign costs to cost pools based on the activities that drive those costs and then using a second-stage allocation to assign costs from the cost pools to the specific cost objects, a more accurate reflection of the actual costs of producing a particular product can be achieved.

The Practice of Assigning the Costs of Idle Capacity to Products