One of the advantages of allocating common fixed costs to a product is that such allocations more accurately reflect the product's true profitability.

Question

Quizplus · Accepted Answer

Allocating common fixed costs to a product does not necessarily reflect its true profitability since fixed costs are not directly tied to production or sales of a specific product. It may artificially inflate or deflate the profitability of certain products.

One of the Advantages of Allocating Common Fixed Costs to a Product