Answered: “A company should not allocate costs…

Business

Accounting

“A company should not allocate costs that are fixed in the short run to customers.” Do you agree? Explain briefly.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 4DQ: A company accepts incremental business at a special price that exceeds the variable cost. What other...

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In a make-or-buy decision, a. the company must choose between expanding or dropping a product line. b. the company must choose between accepting or rejecting a special order. c. the company would consider the purchase price of the externally provided good to be relevant. d. the company would consider all fixed overhead to be irrelevant. e. None of these.
Why would a firm ever offer a price on a product that is below its full cost?
Which one of the following statement is not correct? Group of answer choices -Opportunity costs are only considered when resources are limited. -Break-even analysis is used to determine how many units of a product or a service a business has to sell to cover all its costs. -Both fixed and variable costs influence short-term decision-making. -Short-term decision-making is all about analysing those costs that will change as a result of taking a particular action.
What is the rationale behind treating period costs as current expenses? a. Period costs are uncontrollable b. Period costs are immaterial c. Allocation of period costs is arbitrary at best and could lead to erroneous decisions d. Period costs will occur whether or not production occurs and so it is improper to allocate these costs to production and defer a current cost of doing business
Companies should always make and sell all products whose selling prices exceed variable costs.” Assuming fixed costs are irrelevant, do you agree? Explain.
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