Different types of companies use different types of cost systems.An effective cost system must have all of the following characteristics except:

Question

Quizplus · Accepted Answer

A cost system must have benefits that exceed its costs in order for it to be effective. If the costs of the cost system exceed its benefits, then it would not make sense to use the cost system. Therefore, option D is incorrect. The other options are all characteristics that an effective cost system should have. Option A states that the benefits of the cost system should exceed its costs, which is correct. Option B states that different costs should be recorded for different purposes, which is also correct as different types of costs are useful for different decisions. Option C states that the cost system should have a decision focus, which is also correct as the cost system should provide useful information for decision making.

Different Types of Companies Use Different Types of Cost Systems