Which is NOT a characteristic of a unit-based costing system?
A) It uses traditional product costing definitions.
B) It uses unit-based activity drivers to assign overhead to products.
C) It offers greater product costing accuracy than an activity-based costing system.
D) It is cheaper than an activity-based costing system.

Question

Quizplus · Accepted Answer

A unit-based costing system is a traditional costing system that assigns overhead to products using a single unit-based activity driver, typically direct labor hours or machine hours. However, it does not necessarily offer greater product costing accuracy than an activity-based costing system, which uses multiple activity drivers to allocate overhead costs more accurately to products. Option D is incorrect because a unit-based costing system is not necessarily cheaper than an activity-based costing system; the cost largely depends on the complexity of the business and the information required for cost analysis.

Which Is NOT a Characteristic of a Unit-Based Costing System