What are your thoughts on these posts? Respond with examples and explain why you agree with this statements

1. Traditional volume-based cost allocation systems can certainly be considered antiquated when examining product costs. This is caused by two potential oversights that can occur when costing with traditional costing systems. The first distortion of costs can occur when the manufacturer produces different products in both high and low volume quantities. For instance, these traditional volume-based systems consider the entire production volume in the allocation of overhead costs onto all products, even though the high-volume products consume significantly less overhead. Meanwhile, the production of more intricate or custom products will most often consume tremendously greater amounts of overhead, but the product cost will not be reflective of this. The second cause of product cost distortions when using traditional volume-based costing is when there is a variance in the size, weight, and complexity of the products being manufactured. In traditional accounting, there will be significant cost distortions since both the direct labor costs and machine and labor hours are not considered when assigning costs. This means that smaller, less complex products will be overpriced, while larger, heavier, more complex products will become underpriced.

2. Traditional volume-based cost allocation systems are more likely to distort product costs because the use of a single cost driver, such as Direct Labor or Machine Hours, can over/under value costs for a company with multiple products which can lead to setting inaccurate sales prices. Traditional methods also account for increasing overhead with increased cost drivers, but it can be inaccurate when compared to activity based costing which also leads to distortions. While traditional methods are great for financial accounting or P&L reports, ABC provides for better process analysis and managerial decisions.

3. In a volume-based cost system the direct and indirect costs are divided by the total amount of product to be produced which gives a cost per item. The cost is then divided between the products with the most volume getting assigned the most cost. This is not always accurate because as the chapter showed in the ice cream example this led to distorted costs and margins showing that vanilla and chocolate were not profitable when in fact they were. This distorted cost also showed that the special flavors were profitable when in fact they were not. If a company was to continue to follow these distorted costs then they would possibly decide to focus on the specialty flavors which would lead to less and false revenues being reported. This example shows why the activity-based costing system would work best in a manufacturing company that produces multiple products that require different resources to produce.