Which of the following is an advantage of using full cost of the product as the cost base?
A) Managers are informed regarding the minimum long-run cost they need to recover to stay in business.
B) Using the full cost of the product as a basis for pricing increases the temptation to cut prices below full costs.
C) Fixed cost allocations can be arbitrary while using full cost of the product as the cost base.
D) It requires a detailed analysis of cost behavior for computations and hence promotes a better understanding of the cost behavior.

Question

Quizplus · Accepted Answer

Using full cost of the product as the cost base provides managers with information regarding the minimum long-run cost they need to recover in order to stay in business. This promotes better decision-making and helps in the formulation of long-term strategies.

Which of the Following Is an Advantage of Using Full