Cost distortion usually exists in the supplier's pricing of products when the supplier sells a large variety of products,but applies overhead equally per unit.

Question

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When a supplier sells a large variety of products but applies overhead equally per unit, the cost of producing each product can vary greatly, leading to cost distortion. This is because each product may require a different amount of resources or labor to produce, but the overhead costs are spread evenly across all products, creating an inaccurate cost per unit.

Cost Distortion Usually Exists in the Supplier's Pricing of Products