CIPS Exam L4M5 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?

AFixed cost allocated to products on the basis of the cost of activities used in producing them

BVariable costs are not taken into product final costs

CUsing marginal cost of producing addition units

DLimited understanding of true costs incurred

Show Suggested Answer

Suggested Answer: A

LO 2, AC 2.1

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

Limited Time Offer

25%

Off

Get Premium L4M5 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Carey

6 days ago

A? Sounds more like an advantage to me. Allocating fixed costs based on activities is a key feature of absorption costing.

upvoted 0 times

...

Donte

10 days ago

Hmm, I'm going with B. Ignoring variable costs in the final product price is a major flaw of absorption costing.

upvoted 0 times

...

Kattie

17 days ago

C? Really? That doesn't sound like a disadvantage of absorption costing at all.

upvoted 0 times

Melodie

5 days ago

A) Fixed cost allocated to products on the basis of the cost of activities used in producing them

upvoted 0 times

...

Tamesha

26 days 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.

upvoted 0 times

...

Rebbecca

27 days ago

I agree with Charlene, D) Limited understanding of true costs incurred can be a problem.

upvoted 0 times

...

Paris

1 months ago

D seems like the best answer. Absorption costing doesn't provide a full understanding of the true costs involved in production.

upvoted 0 times

Letha

2 days ago

It's true, absorption costing method can be misleading in terms of actual costs incurred.

upvoted 0 times

...

Reena

12 days ago

I agree, D is the correct answer. Absorption costing can lead to limited understanding of true costs.

upvoted 0 times

...

Charlene

1 months ago

I think the disadvantage is D) Limited understanding of true costs incurred.

upvoted 0 times

...