Which of the following statements is true? Indicators of problems with product cost systems are:
i.non-manufacturing costs that are product related become insignificant
ii.the proportion of manufacturing overhead not driven by production volume increases
iii.there is an increase in product diversity
A) i
B) ii
C) iii
D) ii and iii

Question

Quizplus · Accepted Answer

When there is an increase in product diversity, it becomes difficult to allocate overheads appropriately, and this contributes to problems with product cost systems. Additionally, when the proportion of manufacturing overhead not driven by production volume increases, it means that there are more expenses that are not directly related to producing products. This can result in inaccurately high or low product costs, leading to problems with product cost systems. Therefore, both options ii and iii are indicators of problems with product cost systems. Option i is incorrect because non-manufacturing costs that are product related should remain significant as long as they are included in the product cost system.

Which of the Following Statements Is True? Indicators of Problems