What are the inadequacies of traditional method of overhead absorption?

Traditional overhead absorption methods often allocate overhead costs based on a single metric, such as direct labor hours or machine hours, which can lead to inaccurate cost assignments. This approach fails to account for the complexity of modern production environments where multiple activities drive overhead costs. Consequently, it can result in distorted product costs, misinformed pricing strategies, and suboptimal resource allocation. Additionally, it may not reflect the actual consumption of resources by different products or services.