Managerial Accounting: Creating Value in a Dynamic Business Environment
11th Edition
ISBN: 9781259569562
Author: Ronald W Hilton Proffesor Prof, David Platt
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 5, Problem 69C
Refer to the product costs developed in requirement (2) of the preceding case. Prepare a table showing how Morelli Electric Motor Corporation’s traditional, volume-based product-costing system distorts the product costs of the standard, deluxe, and heavy-duty models. (You may wish to refer to Exhibit 5–10 for guidance. Because of rounding in the calculation of the product costs, there will be a small rounding error in this cost distortion analysis as well.)
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Which of the following statements is not true regarding the use of variable and absorption costing for performance measurement?
The net income reported under the absorption method is less reliable for use in performance evaluations because the cost of the product includes fixed costs, which means the level of inventory affects net income.
The net income reported under the contribution income statement is more reliable for use in performance evaluations because the product cost does not include fixed costs.
Variable costing isolates contribution margins to aid in decision making.
The Internal Revenue Service allows either absorption or variable costing as long as the method is not changed from year to year, while U.S. GAAP only allows absorption costing.
Which of the following statements is false ?
a. Volume-based costing has typically resulted in undercost for high-volume products and overcost for low-volume products .
b. All the statements are false .
c . Activity-based costs per unit are always greater than volumebased costs per unit.
d. Activity-based costing typically provides less information about product costs while requiring more recordkeeping.
e. Different cost allocation methods are constructed so that they typically result in the same or similar estimates of how much it costs to make a product.
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.
Chapter 5 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 5 - Briefly explain how a traditional, volume-based...Ch. 5 - Prob. 2RQCh. 5 - Explain how an activity-based costing system...Ch. 5 - What are cost drivers? What is their role in an...Ch. 5 - List and briefly describe the four broad...Ch. 5 - How can an activity-based costing system alleviate...Ch. 5 - Prob. 7RQCh. 5 - How is the distinction between direct and indirect...Ch. 5 - Explain the concept of a pool rate in...Ch. 5 - Briefly explain two factors that tend to result in...
Ch. 5 - List three factors that are important in selecting...Ch. 5 - Prob. 12RQCh. 5 - Explain why a new product-costing system may be...Ch. 5 - Prob. 14RQCh. 5 - Are activity-based costing systems appropriate for...Ch. 5 - Explain why maintaining their medical-services...Ch. 5 - How could the administration at Immunity Medical...Ch. 5 - Prob. 18RQCh. 5 - Prob. 19RQCh. 5 - What is meant by the term activity analysis? Give...Ch. 5 - Prob. 21RQCh. 5 - What is meant by customer-profitability analysis?...Ch. 5 - Explain the relationship between customer profit...Ch. 5 - What is a customer profitability profile?Ch. 5 - Describe the use of practical capacity in a TDABC...Ch. 5 - Tioga Company manufactures sophisticated lenses...Ch. 5 - Urban Elite Cosmetics has used a traditional cost...Ch. 5 - Kentaro Corporation manufactures Digital Video...Ch. 5 - Kentaro Corporation manufactures Digital Video...Ch. 5 - Prob. 31ECh. 5 - Refer to the description given for Wheelco, Inc....Ch. 5 - Prob. 33ECh. 5 - United Technologies Corporation implemented...Ch. 5 - Redwood Company sells craft kits and supplies to...Ch. 5 - Non-value-added costs occur in nonmanufacturing...Ch. 5 - Since you have always wanted to be an...Ch. 5 - Prob. 39ECh. 5 - Prob. 42ECh. 5 - Big Apple Design Company specializes in designing...Ch. 5 - Prob. 44ECh. 5 - Borealis Manufacturing has just completed a major...Ch. 5 - Ontario, Inc. manufactures two products, Standard...Ch. 5 - Kitchen Kings Toledo plant manufactures three...Ch. 5 - Prob. 48PCh. 5 - Maxey Sons manufactures two types of storage...Ch. 5 - Prob. 50PCh. 5 - John Patrick has recently been hired as controller...Ch. 5 - The controller for Tulsa Medical Supply Company...Ch. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Prob. 55PCh. 5 - World Gourmet Coffee Company (WGCC) is a...Ch. 5 - Knickknack, Inc. manufactures two products: Odds...Ch. 5 - Prob. 58PCh. 5 - Marconi Manufacturing produces two items in its...Ch. 5 - Gigabyte, Inc. manufactures three products for the...Ch. 5 - Refer to the new target prices for Gigabytes three...Ch. 5 - Prob. 62PCh. 5 - Better Bagels, Inc. manufactures a variety of...Ch. 5 - Midwest Home Furnishings Corporation (MHFC)...Ch. 5 - Fresno Fiber Optics, Inc. manufactures fiber optic...Ch. 5 - Refer to the information given in the preceding...Ch. 5 - Whitestone Company produces two subassemblies,...Ch. 5 - Morelli Electric Motor Corporation manufactures...Ch. 5 - Refer to the product costs developed in...Ch. 5 - Morelli Electric Motor Corporations controller,...
Knowledge Booster
Learn more about
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
- 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 plantwide rates to assign cost accurately.arrow_forwardDiscuss how, as warehouse manager for Vinnies Vinyls, you view the different rate of allocated costs the warehouse is being charged compared to the West store. Describe the implications of this. What steps could you take to solve this discrepancy? What alternatives would you consider, assuming management is willing to consider making changes in the rate?arrow_forwardWhich of the following statements is not true regarding the use of variable and absorption costing for performance measurement? a. The net income reported under the absorption method is less reliable for use in performance evaluations because the cost of the product includes fixed costs, which means the level of inventory affects net income. b. The net income reported under the contribution income statement is more reliable for use in performance evaluations because the product cost does not include fixed costs. c. Variable costing isolates contribution margins to aid in decision making. d. The Internal Revenue Service allows either absorption or variable costing as long as the method is not changed from year to year, while U.S. GAAP only allows absorption costing.arrow_forward
- Which of the following statement is false? O The only difference between absorption costing and variable costing is howthe variable MOH is treated. O A traditional income statement uses absorption costing, where both variableand fixed manufacturing costs are included when calculating the productcost. O For external financial reporting purposes, GAP requires the traditionalformat income statement. O For external financial reporting purposes, companies need to classify theircosts as product costs or period costs following GAAP.arrow_forwardWhich of the following statements is false? (You may select more than one answer.)a. Activity-based costing systems usually shift costs from low-volume products tohigh-volume products.b. Benchmarking can be used to identify activities with the greatest potential forimprovement.c. Activity-based costing is most valuable to companies that manufacture products thatare similar in terms of their volume of production, batch size, and complexity.d. Activity-based costing systems are based on the assumption that the costs included ineach activity cost pool are strictly proportional to the cost pool’s activity measure.arrow_forwardWhat from the upcoming options will be made when using the traditional costing method, relatively to using the ABC costing method? Pick only one answer – Underestimating the products cost with products that have low direct costs, and one-time products that are produced in small series. A tight costing connection between the cost and the factor causing it. All the answers are incorect. A higher cost for implementing and managing the accounts managing system, the general and the costing. Overestimating the products cost with products that have low direct costs, and one-time products that are produced in small series.arrow_forward
- When a traditional, volume-based costing system is used, which of the following products is most likely to suffer from cost distortion? Select one O a. A low-volume, low-complexity product ObA low-volume, high-complexity product O CA low-volume, medium-complexity product O d. none of the given answer O e. A high-volume, medium-complexity productarrow_forwardPlease explain thoroughly with examples. Which statement(s) is True/False and why? If none are true, please restate them to be true. 1. When a company implements activity-based costing, manufacturing overhead cost is often shifted from low volume products to high volume products, with a higher unit cost resulting for the high volume products. 2. When a company implements activity-based costing, manufacturing overhead cost is often shifted from low volume products to high volume products, with a higher unit cost resulting for the low volume products. 3. When a company implements activity-based costing, manufacturing overhead cost is often shifted from high volume products to low volume products, with a higher unit cost resulting for the high volume products. 4. When a company implements activity-based costing, manufacturing overhead cost is often shifted from high volume products to low volume products, with a higher unit cost resulting for the low volume products.arrow_forwardall of the following are reasons to use backflush costing, except a. Managers tend to use their limited resources on developing more accurate product cost data. b. Complex Ledger systems may be too costly to develop under traditional cost tracking systems. c. Accuracy is critical whem allocationg accurate conversion cost per unit. d. A fairly rough allocation may be sufficient for external reporting purposes.arrow_forward
- Which among the following is not true about traditional costing system? a. This method allocates greater proportion of overheads to high volume products b. This method avoids the phenomenon of product cost cross subsidization c. This method allocates smaller proportion of overheads to low volume products d. This method leads to cost smoothingarrow_forwardBriefly explain two factors that tend to result in product cost distortion under traditional, volume-based product costing systems.arrow_forwardWhich of the following statement is correct? A In a variable costing income statement, sales revenue is typically higher than in absorption costing income statement. B When production is not equal to sales, income under absorption costing differs from income under variable costing due to the difference in treatment ( product cost and period cost) of the fixed overhead cost under the two costing methods. C In variable costing system, fixed overhead cost is included as part of the cost of inventory. D In an absorption costing system, fixed overhead cost is treated as a period cost.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY