There are several criticisms of traditional cost accounting systems.One criticism is that the traditional cost system uses a volume-driven base,such as direct labor or machine hours,to apply overhead to products.What is the drawback to the use of such a measurement in a traditional cost accounting system?
A)The cost accountant may not fully understand how to track direct labor or machine hours.
B)It is difficult for an AIS to incorporate such a measurement into its system.
C)It is difficult for an ERP to incorporate such a measurement into its integrated system.
D)Many overhead costs are incorrectly allocated to products since they do not vary with production volume.

Question

Quizplus · Accepted Answer

Using a volume-driven base to apply overhead to products assumes that overhead costs vary proportionally with production volume. However, many overhead costs do not vary with production volume, leading to incorrect allocation of these costs to products. This can result in distorted product costs and may lead to poor decision-making.

There Are Several Criticisms of Traditional Cost Accounting Systems