Why do accountants normally calculate cost per unit as an average?
A) Determining the exact cost of a product is virtually impossible.
B) Some manufacturing-related costs cannot be accurately traced to specific units of product.
C) Even when producing multiple units of the same product, normal variations occur in the amount of materials and labor used.
D) All of these are justifications for computing average unit costs.

Question

Quizplus · Accepted Answer

All of the given options are valid justifications for calculating cost per unit as an average. It is difficult to determine the exact cost of a product due to a variety of factors, such as the complexity of the manufacturing process or fluctuations in the cost of raw materials. Some manufacturing-related costs, such as rent and utilities, cannot be directly attributed to specific units of product. Additionally, even when producing multiple units of the same product, there may be variations in the amount of materials and labor used due to normal human error or variance in raw materials. Therefore, calculating an average cost per unit helps to provide a more accurate understanding of the cost of production.

Why Do Accountants Normally Calculate Cost Per Unit as an Average