Question

What are some potential problems caused by allocating all expenses to products?

Answer 1

	Allocating all expenses to products can create some potential problems as follows:-
*	It creates inefficiencies, under and over costing of products.
*	Unawareness that what may be increasing the cost of a certain product.
*	This allocation completely ignores the category of cost i.e. the difference between fixed and variable costs
*	Allocation of all costs to a product may result in the product receiving costs that are not even related to producing it and, therefore, is entirely inaccurate