Which of the following best describes the impact of undercosting in the allocation of production costs?
A) This is a goal of all companies because undercosting all products allows for larger profit margins.
B) Companies will use target pricing to undercost products.
C) Undercosting some products will lead to overcosting other products, which may then become overpriced and lose market share.
D) Undercosting some products can lead to overcosting other products, which is acceptable because it all balances out in the long run.

Question

Quizplus · Accepted Answer

Undercosting some products will result in overcosting other products, which may become overpriced and lose market share. This can have a negative impact on the company's overall profitability and competitiveness. It is important to allocate production costs accurately to ensure that prices remain competitive and reflect the true cost of each product.

Which of the Following Best Describes the Impact of Undercosting