Solutions to Questions

2672 WordsApr 22, 201211 Pages
Chapter 7 Activity-Based Costing: A Tool to Aid Decision Making Solutions to Questions 7-1 Activity-based costing differs from traditional costing systems in a number of ways. In activity-based costing, nonmanufacturing as well as manufacturing costs may be assigned to products. And, some manufacturing costs—including the costs of idle capacity--may be excluded from product costs. An activity-based costing system typically includes a number of activity cost pools, each of which has its unique measure of activity. These measures of activity often differ from the allocation bases used in traditional costing systems. 7-2 When direct labor is used as an allocation base for overhead, it is implicitly assumed that overhead cost is…show more content…
Managers may be reluctant to take these actions—particularly if it involves firing or transferring people. The action analysis has the advantage of making it clearer where savings have to come from and hence which managers will have to take action. Exercise 7-1 (10 minutes) |a. |Various individuals manage the parts inventories. |Product-level | |b. |A clerk in the factory issues purchase orders for a job. |Batch-level | |c. |The personnel department trains new production workers. |Organization-sustaining | |d. |The factory’s general manager meets with other department heads such as marketing to coordinate |Organization-sustaining | | |plans. | | |e. |Direct labor workers assemble products. |Unit-level | |f. |Engineers design new products. |Product-level | |g. |The materials storekeeper issues raw materials to be used in jobs. |Batch-level | |h. |The
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