A traditional cost allocation system may distort product costs because:
A) too many cost pools are used.
B) too many cost drivers are used.
C) of a lack of cause and effect associated with the cost drivers and the allocated costs.
D) they use estimates when allocating costs, whereas an activity-based costing system uses actual costs.

Question

Quizplus · Accepted Answer

Traditional cost allocation systems often use broad averages to allocate costs, which can distort product costs due to a lack of a direct cause-and-effect relationship between the activities that drive costs and the way those costs are allocated to products.

A Traditional Cost Allocation System May Distort Product Costs Because