Asked by Brooke Cooper on Jun 09, 2024
Verified
Which of the following statements is true? Indicators of problems with product cost systems exist when:
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
Production Volume
The total quantity of goods or products manufactured or produced within a certain period of time.
Product Diversity
The range or variety of different products offered by a company to cater to various customer preferences or market segments.
- Pinpoint the shortcomings of traditional costing practices and the circumstances that result in inaccurate product costings.
Verified Answer
CW
Chastiny WalkerJun 12, 2024
Final Answer :
D
Explanation :
When non-manufacturing costs that are product related become insignificant, it suggests that the product cost system is not accurately reflecting the product cost. This is an indicator of a problem with the system. Similarly, when there is an increase in product diversity, the product cost system may struggle to accurately allocate costs to different products, indicating a problem. The proportion of manufacturing overhead not driven by production volume increasing is also an indicator of a problem with the system. Therefore, options ii and iii are correct.
Learning Objectives
- Pinpoint the shortcomings of traditional costing practices and the circumstances that result in inaccurate product costings.
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