Answered: Would the pandemic and shortages could…

Would the pandemic and shortages could cause some companies to decide to use a different method of costing? If so, why and what method would they use?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 13Q: Why would managers prefer variable costing over absorption costing?

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Why would managers prefer variable costing over absorption costing?
Why is the direct labor cost category eliminated in many lean manufacturing environments?
Which of the following is a possible cause of an unfavorable labor efficiency variance? A. hiring substandard workers B. making too many Units C. buying higher-quality material D. paying too much for workers
Do you think that the pandemic and shortages could cause some companies to decide to use a different method of costing? If so, why?
What are the different approaches Tesla Motors could take to reduce possible undesirable behavior associated with the use of absorption costing at its Fremont plant?
Explain why a new product costing system may be needed when line managers suggest that an apparently profitable product be dropped.
Why do most companies use normal or standard costing? After all, actual costing gives the actual cost, so the firm could just wait until it knows what the cost will be. What could be some ramification of waiting to observe actual cost?
Prentice Company is considering dropping one of its product lines. What costs of the product linewould be relevant to this decision? What costs would be irrelevant?
Which of the following is not a consideration when a manager is deciding to discontinue a product or product line? Whether the product has a positive or negative contribution margin. Determining if direct fixed costs could be avoided if the product or product line is discontinued. If discontinuing the product or product line will affect sales of remaining products. Not having any free capacity.
Which of the following is NOT a problem associated with standard cost accounting? a. Standard costing motivates management to produce large batches of products and build inventory. b. Applying standard costing leads to product cost distortions in a lean environment. c. Standard costing data are associated with excessive time lags that reduce its usefulness. d. The financial orientation of standard costing may promote bad decisions. e. All of the above are problems with standard costing.
A basic belief of variable costing is that period costs should be currently expensed. What is thebasic rationale behind this procedure?a. Period costs are uncontrollable and should not be charged to a specific product.b. Period costs are generally immaterial in amount and the cost of assigning the amountsto specific products would outweigh the benefits.c. Allocation of period costs is arbitrary at best and could lead in erroneous decisions bymanagement.d. Period costs will occur whether or not production occurs and so it is improper toallocate these costs to production and defer a current cost of doing business.
The company director of the marketing department, stated that the company should not adopt activity-based costing because it will result in the costs of some of the products going up but the market will not allow for raising prices. How would you respond?