Managing and sustaining product diversity requires many more overhead resources such as production schedulers and product design engineers than managing and sustaining a single product. The costs of these resources can be accurately allocated to products using activity-based costing than traditional costing which is based entirely on direct labor-hours.

Product Diversity

The range of different products or services offered by a business to meet various customer needs and market demands.

Overhead Resources

All indirect costs involved in running a business that cannot be directly attributed to a specific product or service.

Activity-Based Costing

An accounting approach that assigns costs to products or services based on the resources they consume, aiming to provide more accurate insights into cost drivers and profitability.