Question

Which of the following is characteristic of the traditional cost system?

a. Reliance on financial performance measures.

b. Many work in process account transactions.

c. Many process control points.

d. All of these choices are correct.

Answer 1

Traditional costing is best used when the overhead of a company is low compared to the direct costs of production. It gives reasonably accurate cost figures when the production volume is large, and changes in overhead costs do not create a substantial difference when calculating the costs of production. Traditional costing methods are inexpensive to implement.

Companies usually use traditional costing for external reports, because it is simpler and easier for outsiders to understand. However, it does not give managers an accurate picture of product costs because the application of overhead burden rates is arbitrary and applied equally to the cost of all products. Overhead costs are not allocated to the products that actually consume the overhead activities.

The traditional costing method is best used for manufacturers that only make a few different products.

From above information it is clear that the answer is all the above

Read carefully and understand the concept