Simple Cost Systems Distort Product Costs Because

question 50

Multiple Choice

Simple cost systems distort product costs because

• A)they do not know how to identify the appropriate units.
• B)competitive pricing is ignored.
• C)they emphasize financial accounting requirements.
• D)they apply average support costs to each unit of product.
• E)they assign direct costs using direct cost tracing.

---

Definitions:

Total Contribution Margin

The difference between total sales revenue and total variable costs, measuring how much revenue covers fixed costs and profits.

CVP Graph

A visual representation of the Cost-Volume-Profit analysis that illustrates the relationships between costs, volume, and profit.

Total Fixed Expenses

Total fixed expenses refer to the sum of all costs that do not change with the level of production or sales over a certain period.

Total Variable Expenses

The sum of all costs that vary directly with the level of production or sales volume over a specific period.