Final answer:
A cost accounting system that uses only unit-based activity-drivers to assign costs to cost objects is known as a traditional cost system. The traditional system allocates overhead costs usually based on machine hours or direct labor hours and may not accurately reflect the resources used in production compared to more complex activity-based costing methods.
Step-by-step explanation:
A cost accounting system that uses only unit-based activity-drivers to assign costs to cost objects is known as a traditional cost system. This method typically allocates overhead costs based on a single measure, such as machine hours or direct labor hours. In contrast to an activity-based cost system that uses multiple cost drivers, both variable and fixed, to allocate costs in a way that more accurately reflects the consumption of resources by different products or services, the traditional cost system might not capture the complex nature of resource usage.
Breaking down total costs into fixed cost, marginal cost, average total cost, and average variable cost is essential for firms to gain a comprehensive understanding of their cost structure. Fixed costs are expenses that do not change with production output, while variable costs are directly tied to the level of production. Marginal cost is the cost of producing one additional unit of output, and average cost spreads the total cost over the number of units produced.