At a Recent Professional Meeting, Two Accountants Discussed Product-Costing Problems

question 14

Essay

At a recent professional meeting, two accountants discussed product-costing problems in their respective companies. Both accountants are familiar with ABC systems but neither firm uses this method.
Accountant A reported that part of the problem in product costing in his firm is that there are major differences between product lines as to volume of units, utilisation of various activities, quality assurance requirements established by customers and size of the products. Accountant B noted that in her firm, which produces consumer products, all products undergo the same basic production processes and in the same sequence, but in an increasing variety of colours and packaging modes.
Both accountants are worried about the potential distortion of product costs under their traditional product costing systems.
Which accountant should be more concerned about the potential distortion? Explain.

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