Question
It is now fairly accepted that conventional cost accounting distorts managements view of business through unrepresentative overhead allocation and inappropriate product costing. This is because
It is now fairly accepted that conventional cost accounting distorts managements view of business through unrepresentative overhead allocation and inappropriate product costing.
This is because the traditional approach usually absorbs overhead costs across products and orders solely on the basis of the direct labour involved in their manufacture. And as direct labour as a proportion of total manufacturing cost continues to fall, this leads to more and more distortion and misrepresentation of the impact of particular products on total overhead costs.
(From an article in the Financial Times)
Discuss the above and suggest what approaches are being adopted by management accountants to overcome such criticism.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started