Traditional costing systems can distort unit manufacturing costs and product profitability when many products are produced and the various products have significantly different production processes.

Question

Quizplus · Accepted Answer

Traditional costing systems typically allocate overhead costs based on direct labor hours or machine hours, which may not accurately reflect the actual amount of overhead resources consumed by each product. This can result in distorted unit manufacturing costs and profitability, particularly when different products have significantly different production processes and resource consumption patterns.

Traditional Costing Systems Can Distort Unit Manufacturing Costs and Product