Cost Accounting V.2
An inappropriate cost accounting system would negatively impact the “real” numbers of how much a product actually cost. The biggest reason to use an activity based cost accounting structure is that you get a clearer picture on how much each product cost based on its subsequent activities that are required to build the product. The criterion would be that the number isn’t real. For example, if the price was less than provided, then the price structure of the product may not accurately reflect the cost of the product and therefore cause a negative in sales.
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