In the calculation of product costs for value streams with multiple products, units shipped instead of units produced is used as the denominator because
A)it reduces conversion costs assigned to the value stream.
B)it motivates managers to reduce inventories.
C)units shipped are always greater than units produced.
D)units shipped is not used.

Question

Quizplus · Accepted Answer

Using units shipped instead of units produced as the denominator motivates managers to reduce inventories because it is calculated based on the actual amount of products sold and delivered to customers, instead of the theoretical amount produced. This encourages the value stream to operate more efficiently and effectively, reducing the amount of excess inventory and improving overall performance.

In the Calculation of Product Costs for Value Streams with Multiple