There Are Several Criticisms of Traditional Cost Accounting Systems

question 18

Multiple Choice

There are several criticisms of traditional cost accounting systems.One criticism is that the traditional cost system uses a volume-driven base,such as direct labor or machine hours,to apply overhead to products.What is the drawback to the use of such a measurement in a traditional cost accounting system?

• A)The cost accountant may not fully understand how to track direct labor or machine hours.
• B)It is difficult for an AIS to incorporate such a measurement into its system.
• C)It is difficult for an ERP to incorporate such a measurement into its integrated system.
• D)Many overhead costs are incorrectly allocated to products since they do not vary with production volume.

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Definitions:

Demand Function

A mathematical representation of the relationship between the quantity of a good that consumers are willing to buy and its price.

Equilibrium Price

The price at which the quantity of a good or service supplied is equal to the quantity demanded.

Food Stamps

Government-issued vouchers used to purchase groceries by individuals and families in need, part of a social assistance program.

Supply And Demand Analysis

An economic model used to understand the pricing and quantity of goods in a market by examining how the availability of a product (supply) and the desire for it (demand) interact.