Volume-based cost accounting systems often do a poor job of product costing because they:

Question

Quizplus · Accepted Answer

Volume-based cost accounting systems often allocate overhead costs based on a single allocation base, such as direct labor hours or machine hours, which may not accurately reflect the amount of resources used by a particular product or activity. This lack of a cause-effect relationship between the allocation base and resource usage can lead to distorted product costs.

Volume-Based Cost Accounting Systems Often Do a Poor Job of Product