Why traditional costing methods may cause great distortion of cost information

1. Fixed manufacturing costs increased proportion, the proportion of direct labor declined, resulting in a large allocation rate of manufacturing costs, easy to cause product cost distortion of scientific and technological progress has led to capital-intensive, reflected in the production of tools is the increase in the value of the equipment and the shortening of the economic life of the equipment value and shortening of the economic life of the equipment reflected in the accounting is the unit of accounting period of the increase in depreciation of fixed assets. Another consequence of scientific and technological progress is the need for more and more mastery of modern science and technology of highly qualified production staff, they make direct labor hours greatly reduced. The double effect of the increase in manufacturing costs and the reduction of direct labor, so that the traditional cost-sharing method of manufacturing costs under the allocation string is very large, and the higher the degree of production gate dynamic, the greater the allocation rate. Excessive allocation rate in the product hours of error does not occur, but also lead to a huge error in product costs.

2. The surge in costs unrelated to man-hours, with no causal relationship between direct labor to allocate these costs, is bound to produce false cost information in the prevailing conditions of the buyer's market, the objective requirements of the production model is more varieties, small quantities.