Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Chapter 4, Problem 3DQ
Explain how a plantwide
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Explain how a plantwide overhead rate, using a unit-based driver, can produce distorted product costs. In your answer, identify two major factors that impair the ability of plantwiderates to assign cost accurately.
Which of the following is most likely to be true of the manufacturing overhead costs assigned to a product
with relatively low volume and high complexity?
O a. An ABC system will assign the same manufacturing overhead costs to the product as a volume-
based system.
O b. Avolume-based system will assign more manufacturing overhead costs to the product than an ABC
system.
O c. An ABC system will assign more manufacturing overhead costs to the product than a volume-based
system.
O d. An ABC system will assign manufacturing overhead costs to the product, while a volume-based
system will not.
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Which of the following is false about activity-based costing?
Implementing an activity-based costing system is more costly than implementing a traditional cost allocation system.
In ABC, the assumption is that activities use resources or cause costs.
An activity-based costing system relies only on volume measures such as direct labor hours to allocate all overhead costs to products.
A traditional cost allocation system and an activity-based costing system are used to estimate the profitability of products.
Chapter 4 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 4 - What is a predetermined overhead rate? Explain why...Ch. 4 - Describe what is meant by under- and overapplied...Ch. 4 - Explain how a plantwide overhead rate, using a...Ch. 4 - What are non-unit-related overhead activities?...Ch. 4 - What is an overhead consumption ratio?Ch. 4 - Overhead costs are the source of product cost...Ch. 4 - What is activity-based product costing?Ch. 4 - What are the six steps that define the design of...Ch. 4 - Explain how the cost of resources is assigned to...Ch. 4 - Prob. 10DQ
Ch. 4 - Identify and define two types of activity drivers.Ch. 4 - What are unit-level activities? Batch-level...Ch. 4 - Prob. 13DQCh. 4 - Prob. 14DQCh. 4 - Prob. 15DQCh. 4 - Prob. 1CECh. 4 - Warner Company has the following data for the past...Ch. 4 - Lansing. Inc., provided the following data for its...Ch. 4 - Larsen, Inc., produces two types of electronic...Ch. 4 - Roberts Company produces two weed eaters: basic...Ch. 4 - Golding Bank provided the following data about its...Ch. 4 - Golding Bank provided the following data about its...Ch. 4 - Electan Company produces two types of printers....Ch. 4 - Patterson Company produces wafers for integrated...Ch. 4 - Selected activities and other information are...Ch. 4 - Ripley, Inc., costs products using a normal...Ch. 4 - Predetermined Overhead Rate, Application of...Ch. 4 - Craig Company uses a predetermined overhead rate...Ch. 4 - Departmental Overhead Rates Mariposa, Inc.,...Ch. 4 - McCourt Company produces two types of leather...Ch. 4 - Deoro Company has identified the following...Ch. 4 - Prob. 17ECh. 4 - Secondary Activities Refer to the interview in...Ch. 4 - Bob Randall, cost accounting manager for Hemple...Ch. 4 - Prob. 20ECh. 4 - Bob Randall, cost accounting manager for Hemple...Ch. 4 - Silven Company has identified the following...Ch. 4 - Silven Company has identified the following...Ch. 4 - Gee Manufacturing produces two models of camshafts...Ch. 4 - Cushing, Inc., costs products using a normal...Ch. 4 - Nonunit-level drivers are prominent in...Ch. 4 - Plata Company has identified the following...Ch. 4 - Assume that the inspection activity has an...Ch. 4 - Consider the information given on two products and...Ch. 4 - Primera Company produces two products and uses a...Ch. 4 - Fisico Company produces exercise bikes. One of its...Ch. 4 - Prob. 32PCh. 4 - Glencoe First National Bank operated for years...Ch. 4 - Autotech Manufacturing is engaged in the...Ch. 4 - The Bienestar Cardiology Clinic has two major...Ch. 4 - Reducir, Inc., produces two different types of...Ch. 4 - Refer to the data given in Problem 4.36 and...Ch. 4 - Escuha Company produces two type of calculators:...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Why are support department costs difficult to apply to products?arrow_forwardWhy is the direct labor cost category eliminated in many lean manufacturing environments?arrow_forwardWhich is not a step in analyzing the cost driver for manufacturing overhead? A. Identify the cost B. identify non-value-added costs C. analyze the effect on manufacturing overhead D. identify the correlation between the potential driver and manufacturing overheadarrow_forward
- How are nonfactory costs and costs that benefit both factory and nonfactory operations accounted for?arrow_forwardWhat advantage does the FIFO cost method have over the average cost method relative to providing information for cost control?arrow_forwardactivity-based costing systems have a tendency to distort product costs. True or False?arrow_forward
- Which of the following statements regarding activity-based costing (ABC) is false? A. ABC is not an appropriate tool for analysing non-manufacturing costs. B. ABC can be used to analyse the profitability of customers. C. ABC evolved as a response to problems with traditional costing systems. D. ABC can be used to measure the cost of cost objects.arrow_forwardWhy functional (or volume)- based costing approaches may produce distorted costs.arrow_forwardExplain why a costing system that uses a volume-based rate is likely to produce distorted productcostsarrow_forward
- Which of the following points about the Activity-based costing (ABC) system is NOT a correct observation: a. Under ABC the unit cost of a product will necessary be less than the unit cost under traditional full (absorption) costing. b. Activities are considered resource drivers because they eat up resources necessary for the activities to happen. c. ABC may generate results that are not suitable for external reporting under IFRS/GAAP. d. Batch-level activities produce costs that may be in proportion to the number of units produced.arrow_forwardBriefly explain two factors that tend to result in product cost distortion under traditional, volume-based product costing systems.arrow_forwardHow do fixed costs create difficulties in costing units of product? please explain in details.arrow_forward
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