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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Interview questions are asked to determine

  1. a. what activities are being performed.
  2. b. who performs the activities.
  3. c. the relative amount of time spent on each activity by individual workers.
  4. d. possible activity drivers for assigning costs to products.
  5. e. All of these.

To determine

Identify the reason for which interview questions are asked.

Explanation

ABC Costing:

In activity based costing, overhead costs are allocated to various departments based on the respective cost driver. ABC costing provides a more accurate allocation than using a threshold rate. For example, using labor hours for allocating ordering costs would not be appropriate, rather number of orders should be used to allocate the cost.

a.

To allocate overhead costs to a particular department, activities that are used within a department should be known. Cost of each activity which is consumed in a department, is allocated on the basis of consumption.

For ABC costing, this information is sought in addition to information required in other options. Therefore, this is not the correct option.

b.

To assign salary of employees to various activities, individual who performs activities are required to be known.

For ABC costing, this information is sought in addition to information required in other options...

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