Cost distortion occurs when some products are overcosted while other products are undercosted by the cost allocation system.

Question

Quizplus · Accepted Answer

Cost distortion can lead to inaccurate product costing and mismanagement of resources as resources may be allocated based on inaccurate costing information. This can lead to overpricing of some products, causing them to be less competitive, and underpricing of others, leading to a loss for the company.

Cost Distortion Occurs When Some Products Are Overcosted While Other