The situation in which cost distortion is more likely to occur.

Question

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Answer 1

Question

Chapter 4, Problem 1QC

To determine

To identify: The situation in which cost distortion is more likely to occur.

Expert Solution & Answer

Answer to Problem 1QC

Option b. Cost distortion is more likely to occur when departments incur different types of overhead and the products or jobs use the department to a different extent.

Explanation of Solution

Cost distortion occurs when some products or jobs are overcosted while others are undercosted under simple allocation system. And this occurs because department incur different types of overhead and the products or jobs use the department resources in different quantities.

a.

A company manufactures one type of product: This is an incorrect option as the cost distortion does not occur when there is a single product manufactured by the entity.

b.

Departments incur different types of overhead and the products or jobs use the department to a different extent: This option is correct because cost distortion is the result of different types of overheads incurred by various departments.

c.

A company uses departmental overhead rates rather than a single plantwide overhead rate: This option is incorrect as the use of departmental overhead rate in the place of the single plantwide overhead rate will not distort the cost in any manner.

d.

All products require the same amount and type of processing activities: Cost distortion will not take place if the amounts of all products are same and type of processing activities is also same. Hence, the choice is incorrect.

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Answer 2

Question

Chapter 4, Problem 1QC

To determine

To identify: The situation in which cost distortion is more likely to occur.

Expert Solution & Answer

Answer to Problem 1QC

Option b. Cost distortion is more likely to occur when departments incur different types of overhead and the products or jobs use the department to a different extent.

Explanation of Solution

Cost distortion occurs when some products or jobs are overcosted while others are undercosted under simple allocation system. And this occurs because department incur different types of overhead and the products or jobs use the department resources in different quantities.

a.

A company manufactures one type of product: This is an incorrect option as the cost distortion does not occur when there is a single product manufactured by the entity.

b.

Departments incur different types of overhead and the products or jobs use the department to a different extent: This option is correct because cost distortion is the result of different types of overheads incurred by various departments.

c.

A company uses departmental overhead rates rather than a single plantwide overhead rate: This option is incorrect as the use of departmental overhead rate in the place of the single plantwide overhead rate will not distort the cost in any manner.

d.

All products require the same amount and type of processing activities: Cost distortion will not take place if the amounts of all products are same and type of processing activities is also same. Hence, the choice is incorrect.

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Answer 3

Question

Chapter 4, Problem 1QC

To determine

To identify: The situation in which cost distortion is more likely to occur.

Expert Solution & Answer

Answer to Problem 1QC

Option b. Cost distortion is more likely to occur when departments incur different types of overhead and the products or jobs use the department to a different extent.

Explanation of Solution

Cost distortion occurs when some products or jobs are overcosted while others are undercosted under simple allocation system. And this occurs because department incur different types of overhead and the products or jobs use the department resources in different quantities.

a.

A company manufactures one type of product: This is an incorrect option as the cost distortion does not occur when there is a single product manufactured by the entity.

b.

Departments incur different types of overhead and the products or jobs use the department to a different extent: This option is correct because cost distortion is the result of different types of overheads incurred by various departments.

c.

A company uses departmental overhead rates rather than a single plantwide overhead rate: This option is incorrect as the use of departmental overhead rate in the place of the single plantwide overhead rate will not distort the cost in any manner.

d.

All products require the same amount and type of processing activities: Cost distortion will not take place if the amounts of all products are same and type of processing activities is also same. Hence, the choice is incorrect.

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Answer 4

Question

Chapter 4, Problem 1QC

To determine

To identify: The situation in which cost distortion is more likely to occur.

Expert Solution & Answer

Answer to Problem 1QC

Option b. Cost distortion is more likely to occur when departments incur different types of overhead and the products or jobs use the department to a different extent.

Explanation of Solution

Cost distortion occurs when some products or jobs are overcosted while others are undercosted under simple allocation system. And this occurs because department incur different types of overhead and the products or jobs use the department resources in different quantities.

a.

A company manufactures one type of product: This is an incorrect option as the cost distortion does not occur when there is a single product manufactured by the entity.

b.

Departments incur different types of overhead and the products or jobs use the department to a different extent: This option is correct because cost distortion is the result of different types of overheads incurred by various departments.

c.

A company uses departmental overhead rates rather than a single plantwide overhead rate: This option is incorrect as the use of departmental overhead rate in the place of the single plantwide overhead rate will not distort the cost in any manner.

d.

All products require the same amount and type of processing activities: Cost distortion will not take place if the amounts of all products are same and type of processing activities is also same. Hence, the choice is incorrect.

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Answer 5

Chapter 4, Problem 1QC

To determine

To identify: The situation in which cost distortion is more likely to occur.

Expert Solution & Answer

Answer to Problem 1QC

Option b. Cost distortion is more likely to occur when departments incur different types of overhead and the products or jobs use the department to a different extent.

Explanation of Solution

Cost distortion occurs when some products or jobs are overcosted while others are undercosted under simple allocation system. And this occurs because department incur different types of overhead and the products or jobs use the department resources in different quantities.

a.

A company manufactures one type of product: This is an incorrect option as the cost distortion does not occur when there is a single product manufactured by the entity.

b.

Departments incur different types of overhead and the products or jobs use the department to a different extent: This option is correct because cost distortion is the result of different types of overheads incurred by various departments.

c.

A company uses departmental overhead rates rather than a single plantwide overhead rate: This option is incorrect as the use of departmental overhead rate in the place of the single plantwide overhead rate will not distort the cost in any manner.

d.

All products require the same amount and type of processing activities: Cost distortion will not take place if the amounts of all products are same and type of processing activities is also same. Hence, the choice is incorrect.

Answer 6

Chapter 4, Problem 1QC

To determine

To identify: The situation in which cost distortion is more likely to occur.

Expert Solution & Answer

Answer to Problem 1QC

Option b. Cost distortion is more likely to occur when departments incur different types of overhead and the products or jobs use the department to a different extent.

Explanation of Solution

Cost distortion occurs when some products or jobs are overcosted while others are undercosted under simple allocation system. And this occurs because department incur different types of overhead and the products or jobs use the department resources in different quantities.

a.

A company manufactures one type of product: This is an incorrect option as the cost distortion does not occur when there is a single product manufactured by the entity.

b.

Departments incur different types of overhead and the products or jobs use the department to a different extent: This option is correct because cost distortion is the result of different types of overheads incurred by various departments.

c.

A company uses departmental overhead rates rather than a single plantwide overhead rate: This option is incorrect as the use of departmental overhead rate in the place of the single plantwide overhead rate will not distort the cost in any manner.

d.

All products require the same amount and type of processing activities: Cost distortion will not take place if the amounts of all products are same and type of processing activities is also same. Hence, the choice is incorrect.

Answer 7

Chapter 4, Problem 1QC

To determine

To identify: The situation in which cost distortion is more likely to occur.

Answer 8

Expert Solution & Answer

Answer to Problem 1QC

Option b. Cost distortion is more likely to occur when departments incur different types of overhead and the products or jobs use the department to a different extent.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Cost distortion occurs when some products or jobs are overcosted while others are undercosted under simple allocation system. And this occurs because department incur different types of overhead and the products or jobs use the department resources in different quantities.

a.

A company manufactures one type of product: This is an incorrect option as the cost distortion does not occur when there is a single product manufactured by the entity.

b.

Departments incur different types of overhead and the products or jobs use the department to a different extent: This option is correct because cost distortion is the result of different types of overheads incurred by various departments.

c.

A company uses departmental overhead rates rather than a single plantwide overhead rate: This option is incorrect as the use of departmental overhead rate in the place of the single plantwide overhead rate will not distort the cost in any manner.

d.

All products require the same amount and type of processing activities: Cost distortion will not take place if the amounts of all products are same and type of processing activities is also same. Hence, the choice is incorrect.