Misleading cost numbers are larger when only unit-level cost drivers are used for allocating overheads of multiple complex products.

Question

Quizplus · Accepted Answer

When only unit-level cost drivers are used, it can result in misleading cost numbers as it does not take into account the complexity and differing production requirements of multiple products. This can lead to over-allocation or under-allocation of overhead costs to different products, resulting in incorrect cost analysis and decision-making.

Misleading Cost Numbers Are Larger When Only Unit-Level Cost Drivers