Final Answer:
Production-cost cross-subsidization results from
C. Assigning costs to different products using varied costing systems within the same organization.
Step-by-step explanation:
c, Production-cost cross-subsidization arises from assigning costs to different products using varied costing systems within the same organization (Option C). This occurs when different products within a company are subject to distinct methods of cost allocation or measurement, leading to an inaccurate distribution of costs among products.
In more detail, when diverse costing systems are employed, there is a risk that certain products may be under- or over-allocated costs. For instance, if one product is assigned costs based on a system that heavily relies on volume, while another is assessed using a system emphasizing complexity, the distribution of indirect costs can become skewed. This discrepancy can result in cross-subsidization, where some products inadvertently bear more or less than their fair share of the total production costs.
This practice can distort decision-making processes, affecting product pricing strategies and resource allocation. To mitigate production-cost cross-subsidization, organizations need to ensure consistent and accurate cost allocation methodologies across all products. A standardized approach helps in achieving a more equitable distribution of costs, providing a clearer picture of each product's true profitability and aiding in effective managerial decision-making.