Asked by Jazzy Asberry on Jun 03, 2024
Verified
Traditional product costing systems result in inaccurate product costs when:
A) direct labour increases.
B) the proportion of direct labour and raw material increases.
C) product diversity increases.
D) the proportion of direct labour and raw material increases AND product diversity increases.
Product Diversity
Refers to the range of different products or services offered by a company, indicating the variety in a company's offerings.
Direct Labour
The workforce engaged directly in the manufacturing process, whose labor costs can be directly attributed to specific products.
- Delineate the restrictions associated with classical costing techniques and the scenarios where they cause erroneous product prices.
Verified Answer
KG
Karneeka GolashJun 08, 2024
Final Answer :
C
Explanation :
Traditional product costing systems allocate overhead costs based on a single volume-based cost driver, such as direct labor hours. When product diversity increases, these systems become less accurate because they fail to account for the different amounts of overhead resources consumed by different products.
Learning Objectives
- Delineate the restrictions associated with classical costing techniques and the scenarios where they cause erroneous product prices.
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