Question

Disadvantages of actual costing include

a. estimates must be used when calculating the actual overhead rate.
b. both a and b.
c. actual cost systems produce unit costs that fluctuate from period to period.
d. actual cost systems cannot provide accurate unit cost information on a timely basis.

Answer 1

Actual costing systems have several drawbacks, including fluctuating unit costs, reliance on estimates that may cause inaccuracies, and delayed provision of cost information which affects decision-making.

Step-by-step explanation:

The disadvantages of actual costing include the fact that actual cost systems produce unit costs that fluctuate from period to period. This variability makes it difficult to predict costs accurately and can lead to inconsistencies in pricing and budgeting. Additionally, actual cost systems require estimates for certain expenses, which can introduce errors. Lastly, actual cost systems often cannot provide accurate unit cost information on a timely basis, which can hamper short-term decision-making.