Why might a single indirect-cost rate distort product costs?
A)Costs are not consistently recorded
B)It fails to measure the correct amount of total costs
C)There is an assumption that all support activities affect all products
D)It recognises specific activities that are required to produce a product

Question

Quizplus · Accepted Answer

A single indirect-cost rate assumes that all support activities affect all products equally, which may not be accurate. This approach can result in distorted product costs since it fails to consider the specific activities required for producing a particular product. Thus, a single indirect-cost rate tends to overestimate or underestimate the cost of some products, leading to poor decision-making.

Why Might a Single Indirect-Cost Rate Distort Product Costs