Question

Which of the following statements is false?

A) Period costs are excluded from the cost of goods sold schedule, job-order cost sheet, and processing costing steps.
B) If physical units were used instead of equivalent units in calculating the per unit cost, the per unit cost would be undercosting.
C) Manufacturing overhead variances arise from the POHRs utilizing estimates at the beginning of the year, and the actual costs at the end of the year differing.
D)Activity-based costing system is always preferred over a traditional or departmental system.
E)Total equivalent units will always be less than total physical units.

Answer 1

The false statement is that the activity-based costing system is always preferred over a traditional or departmental system, as the use of either depends on specific business needs. Per-unit costs such as average cost, variable costs, and marginal cost provide insights on costs for individual units, which differ from total production costs.

Step-by-step explanation:

The statement that is false among the options provided is D) Activity-based costing system is always preferred over a traditional or departmental system. It is not always preferred because the decision to use an activity-based costing (ABC) system over a traditional costing system depends on multiple factors, including the complexity of production, the degree of product diversity, and the specific needs of the business in terms of cost accuracy. While ABC can provide more accurate costing information by tracing costs more closely to the activities that generate them, it is also more complex and costly to implement. Therefore, it is not universally preferred.

The subject of this question falls into the realm of business, specifically cost accounting. When discussing per-unit costs, it is essential to differentiate between costs that are calculated on a per-unit basis versus those measured in total dollars. Fixed costs, average cost, average variable cost, variable costs, and marginal cost are measured per unit of output. Fixed costs do not vary with the level of production output and are considered sunk costs. Variable costs, on the other hand, fluctuate with production activity. Consequently, marginal cost refers to the cost of producing one additional unit of goods. Production technology involves the methods and processes used to produce goods and services efficiently.