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Question 5 Which of the following statements is false: A. Conventional product costing systems recognise a...

Question 5

Which of the following statements is false:

A. Conventional product costing systems recognise a range of non-volume based cost drivers.

B. In conventional costing, the high-volume products are often subsidising the low-volume products.

C. Conventional costing systems tend to create a product cost distortion problem.

D. Conventional costing systems tend to over cost high-volume product lines.

Solutions

Expert Solution

The correct answer for the question is Option A - Conventional costing systems recognize a range of non-volume based cost drivers. This statement is generally not true. Conventional costing system(otherwise known as the traditional costing system) does not provide an indication of the non-volume based cost drivers. As such, this is not the correct answer.

Option B is incorrect. Since an uniform method of costing is followed, often, in conventional costing system, the high volume products tend to over power/subsidise the low - volume products.

Option C is incorrect. This statement is true. Conventional costing systems create a product distortion problem.

Option D is incorrect. Because of its nature, the conventional costing systems tend to over cost the high volume product lines as it does not lay importance to non-volume based cost drivers. As such, this is not the valid answer.

Please let me know if you have any questions via comments and all the best :) !

ekkarill92 answered 2 years ago
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