The biggest challenge in computing the total cost per unit of a product is determining the amount of overhead cost that should be assigned to each unit.

Question

Quizplus · Accepted Answer

Overhead costs include expenses that cannot be directly traced to a particular unit or product, such as rent, utilities, and insurance. These costs must be allocated based on a predetermined formula or allocation method, which can be a challenging and subjective process. Therefore, determining the amount of overhead cost to assign to each unit is a significant challenge in calculating the total cost per unit of a product.

The Biggest Challenge in Computing the Total Cost Per Unit