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CIPS L4M5 Exam - Topic 6 Question 75 Discussion

Which of the following is a disadvantage of absorption costing method?
A) Fixed cost allocated to products on the basis of the cost of activities used in producing them
B) Variable costs are not taken into product final costs
C) Using marginal cost of producing addition units
D) Limited understanding of true costs incurred

CIPS L4M5 Exam - Topic 6 Question 75 Discussion

Actual exam question for CIPS's L4M5 exam
Question #: 75
Topic #: 6
[All L4M5 Questions]

Which of the following is a disadvantage of absorption costing method?

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Suggested Answer: A

LO 2, AC 2.1


by Veronika at Nov 18, 2024, 09:40 PM

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Simona
9 months ago
C is about marginal costs, not really a disadvantage in my opinion.
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Chantay
9 months ago
Wait, are we sure B is a disadvantage? Seems odd.
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Annabelle
10 months ago
Totally agree with D, it really skews the cost picture.
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Eura
10 months ago
I think A is misleading, fixed costs are important too.
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Albina
10 months ago
D is definitely a disadvantage.
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Kizzy
10 months ago
I’m leaning towards option D as well, but I’m a bit confused about how marginal costs fit in. Is that related to option C?
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Josefa
11 months ago
I feel like I've seen a similar question before, and I think it was about how absorption costing doesn't really reflect variable costs properly. Could that be option B?
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Winfred
11 months ago
I'm not entirely sure, but I remember something about fixed costs being allocated differently in absorption costing. Maybe option A?
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Dana
11 months ago
I think option D might be the right answer because absorption costing can obscure the actual costs involved.
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Nobuko
11 months ago
The answer is D - limited understanding of true costs incurred. Absorption costing doesn't provide the full picture since it includes fixed costs, unlike variable costing.
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Tyisha
11 months ago
I'm a bit confused on this one. Is it something to do with how fixed costs are allocated? I'll need to review my notes to be sure.
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Carli
11 months ago
Okay, I've got this. The disadvantage is that variable costs are not taken into the final product costs under absorption costing. That's the key difference from variable costing.
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Clay
11 months ago
Hmm, this one seems tricky. I'll need to think through the differences between absorption and variable costing to figure out the key disadvantage of absorption costing.
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Ria
1 year ago
Absorption costing? More like absorbing my tears after this exam.
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Dierdre
1 year ago
D) Limited understanding of true costs incurred
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Antione
1 year ago
B) Variable costs are not taken into product final costs
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Frederick
1 year ago
A) Fixed cost allocated to products on the basis of the cost of activities used in producing them
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Martina
1 year ago
I heard the exam board is using absorption costing to calculate the pass mark. Good luck, everyone!
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Moira
1 year ago
Let's just focus on studying and doing our best.
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Irene
1 year ago
I heard absorption costing can lead to limited understanding of true costs.
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Erick
1 year ago
I hope they consider all the costs involved in the exam.
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Carey
1 year ago
A? Sounds more like an advantage to me. Allocating fixed costs based on activities is a key feature of absorption costing.
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Ronny
1 year ago
D) Limited understanding of true costs incurred
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Flo
1 year ago
B) Variable costs are not taken into product final costs
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Tayna
1 year ago
A) Fixed cost allocated to products on the basis of the cost of activities used in producing them
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Donte
1 year ago
Hmm, I'm going with B. Ignoring variable costs in the final product price is a major flaw of absorption costing.
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Shaun
1 year ago
It's important to consider all costs to get a true picture of profitability.
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Shawnta
1 year ago
Yeah, ignoring variable costs can lead to inaccurate product pricing.
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Ena
1 year ago
I agree, B is a big disadvantage of absorption costing.
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Kattie
1 year ago
C? Really? That doesn't sound like a disadvantage of absorption costing at all.
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Lorenza
1 year ago
C? Really? That doesn't sound like a disadvantage of absorption costing at all.
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Mary
1 year ago
D) Limited understanding of true costs incurred
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Melodie
1 year ago
A) Fixed cost allocated to products on the basis of the cost of activities used in producing them
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Tamesha
1 year ago
But what about A) Fixed cost allocated to products on the basis of the cost of activities used in producing them? That can also be a disadvantage.
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Rebbecca
1 year ago
I agree with Charlene, D) Limited understanding of true costs incurred can be a problem.
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Paris
1 year ago
D seems like the best answer. Absorption costing doesn't provide a full understanding of the true costs involved in production.
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Eladia
1 year ago
Yes, D is the disadvantage of absorption costing. It may not provide a comprehensive view of the true costs.
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Veda
1 year ago
I think D is the most accurate choice. Absorption costing may not give a complete picture of all costs involved.
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Letha
1 year ago
It's true, absorption costing method can be misleading in terms of actual costs incurred.
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Reena
1 year ago
I agree, D is the correct answer. Absorption costing can lead to limited understanding of true costs.
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Charlene
1 year ago
I think the disadvantage is D) Limited understanding of true costs incurred.
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