The cost measurement system can impact how indirect costs are spread among product lines,which may affect decisions managers make.

Question

Quizplus · Accepted Answer

The way indirect costs are allocated to product lines can influence the perceived profitability of each line and therefore affect the decisions made by managers. A cost measurement system that heavily allocates indirect costs to one product line may make that line appear less profitable than others, leading managers to potentially make decisions that are not in the best interest of the company as a whole.

The Cost Measurement System Can Impact How Indirect Costs Are