Why Do Traditional Cost Systems Distort Product Costs

question 190

Multiple Choice

Why do traditional cost systems distort product costs?

• A)Competitive pricing is ignored
• B)They apply average support costs to each unit of product
• C)They emphasise financial accounting requirements
• D)They do not know how to identify the appropriate units

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Definitions:

Tragedy of the Commons

The Tragedy of the Commons is a situation in a shared-resource system where individual users acting independently and rationally according to their own self-interest behave contrary to the common good of all users by depleting or spoiling the shared resource.

Economically Efficient

A situation where resources are allocated in a way that maximizes the net benefits to society or achieves the desired output with the least possible input.

Tragedy of the Commons

A scenario where individuals, guided solely by their personal gain, independently exploit or degrade communal assets, despite such actions being against the collective long-term benefits.

Grazing Land

Land used for the purpose of raising livestock, where animals feed on naturally grown grasses and other plants.