Cost allocations ignore the "lumpy" nature of capacity resources, and estimate costs as if we can match supply and demand continuously and smoothly.

Question

Quizplus · Accepted Answer

Cost allocations often spread the costs of capacity resources evenly over units of output, ignoring the fact that these resources are not always used smoothly and continuously, but rather in fixed increments or "lumps."

Cost Allocations Ignore the "Lumpy" Nature of Capacity Resources, and Estimate