Fundamentals Of Cost Accounting (6th Edition)
6th Edition
ISBN: 9781259969478
Author: WILLIAM LANEN, Shannon Anderson, Michael Maher
Publisher: McGraw Hill Education
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Chapter 9, Problem 16CADQ
“Activity-based costing could not be applied in a business school.” Do you agree? Explain.
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Which of the following statements regarding activity-based costing (ABC) is false?
A.
ABC is not an appropriate tool for analysing non-manufacturing costs.
B.
ABC can be used to analyse the profitability of customers.
C.
ABC evolved as a response to problems with traditional costing systems.
D.
ABC can be used to measure the cost of cost objects.
Why would a business that uses traditional costing systems consider implementing activity-based costing? Discuss the following in your answer:
Problems with traditional costing systems in a modern manufacturing environment.
Whether the benefits of activity-based costing always outweigh the costs.
Is Standard costing still a useful tool for the Management accountant? How could it be adapted to suit the service sector?
Chapter 9 Solutions
Fundamentals Of Cost Accounting (6th Edition)
Ch. 9 - Give examples of cost drivers commonly used to...Ch. 9 - What is the death spiral? How is it related to the...Ch. 9 - The product costs reported using either plantwide...Ch. 9 - Why do companies commonly use direct labor-hours...Ch. 9 - What are the costs of moving to an activity-based...Ch. 9 - What are the basic steps in computing costs using...Ch. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - What type of organization is most likely to...Ch. 9 - Prob. 10RQ
Ch. 9 - How does complexity lead to higher costs? Why is...Ch. 9 - Prob. 12RQCh. 9 - Prob. 13RQCh. 9 - Why are cost drivers based on direct labor widely...Ch. 9 - Prob. 15CADQCh. 9 - Activity-based costing could not be applied in a...Ch. 9 - Activity-based costing is the same as department...Ch. 9 - Prob. 18CADQCh. 9 - It is clear after reading this chapter that...Ch. 9 - Prob. 20CADQCh. 9 - Prob. 21CADQCh. 9 - Prob. 22CADQCh. 9 - Prob. 23CADQCh. 9 - Activity-based costing is just another inventory...Ch. 9 - Prob. 25CADQCh. 9 - Prob. 26CADQCh. 9 - Prob. 27CADQCh. 9 - One of the issues we identified with traditional...Ch. 9 - The cost accounting manager at your business says...Ch. 9 - Prob. 30CADQCh. 9 - Prob. 31ECh. 9 - Reported Costs and Decisions Kima Company...Ch. 9 - Plantwide versus Department Allocation Munoz...Ch. 9 - Plantwide versus Department Allocation Main Street...Ch. 9 - Unitwide versus Department...Ch. 9 - Prob. 36ECh. 9 - Prob. 37ECh. 9 - Upriver currently applies overhead on the basis of...Ch. 9 - Compute the unit costs for the two products, V-1...Ch. 9 - Prob. 40ECh. 9 - Prob. 41ECh. 9 - Activity-Based Costing in a Nonmanufacturing...Ch. 9 - Activity-Based versus Traditional Costing Maglie...Ch. 9 - Activity-Based Costing versus Traditional Costing...Ch. 9 - Activity-Based Costing in a Service Environment...Ch. 9 - Activity-Based versus Traditional Costing Isadores...Ch. 9 - Prob. 47ECh. 9 - Activity-Based Costing: Cost Flows through...Ch. 9 - Prob. 49ECh. 9 - Activity-Based Costing for an Administrative...Ch. 9 - Prob. 51ECh. 9 - Time-Driven Activity-Based Costing Kim...Ch. 9 - Time-Driven ABC for an Administrative Service The...Ch. 9 - Comparative Income Statements and Management...Ch. 9 - Comparative Income Statements and Management...Ch. 9 - Prob. 56PCh. 9 - Activity-Based Costing and Predetermined Overhead...Ch. 9 - Activity-Based Costing and Predetermined Overhead...Ch. 9 - Choosing an Activity-Based Costing System Pickle...Ch. 9 - Churchill Products is considering updating its...Ch. 9 - Utica Manufacturing (UM) was recently acquired by...Ch. 9 - Cain Components manufactures and distributes...Ch. 9 - Prob. 63PCh. 9 - Prob. 64PCh. 9 - Prob. 65PCh. 9 - Cawker Products has two manufacturing...Ch. 9 - MTI makes three types of lawn tractors: M3100,...Ch. 9 - Prob. 68PCh. 9 - Prob. 69PCh. 9 - Prob. 72IC
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- Activity-based costing does a better job of allocating both direct and indirect cost than traditional methods do.” Is this statement true, false, or uncertain? Explain providing specific evidence to support your view.arrow_forwardWhich of the following statements is not false of costing systems? A. Activity-based costing systems tend to use fewer cost pools than does a traditional costing system. B. Many traditional costing systems can distort product costs and profitability. C. Activity-based costing systems tend to combine various costs into a single cost pool. D. Traditional costing systems tend to be more costly than activity-based costing systemsarrow_forwardWhy 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?arrow_forward
- Explain how far you agree that the Activity-Based-Costing system is a superior model compared to the traditional model.arrow_forwardAre the concepts underlying a relevant-cost analysis still valid in an advanced manufacturing environment? Are these concepts valid when activity-based costing is used? Explain.arrow_forwardDisadvantages of activity-based costing include which of the following? a. It is not acceptable under GAAP for external reporting. b. It can be costly to implement. c. It can be used in activity-based management. d. Both a. and b.arrow_forward
- Explain the implementation issues with Activity Based Costing including: -lack of clear business purpose -lack of senior management commitment -delegating the project to consultants -poor ABC model designarrow_forwardWhich of the following is false about activity-based costing? Implementing an activity-based costing system is more costly than implementing a traditional cost allocation system. In ABC, the assumption is that activities use resources or cause costs. An activity-based costing system relies only on volume measures such as direct labor hours to allocate all overhead costs to products. A traditional cost allocation system and an activity-based costing system are used to estimate the profitability of products.arrow_forwardBriefly discuss two methods of reducing the undesirable incentives associated with the use of absorption costing to evaluate the performance of a plant manager.arrow_forward
- How would you explain to a company’s management the primary difference between traditional and activity-based costing?arrow_forwardactivity-based costing systems have a tendency to distort product costs. True or False?arrow_forwardWhich of the following organizational characteristics critically affect the design of a cost management system? Select one: a. Culture Critical success factors Mission Form Yes Yes Yes Yes b. Culture Critical success factors Mission Form No Yes No Yes c. Culture Critical success factors Mission Form No Yes Yes No d. Culture Critical success factors Mission Form Yes Yes No Noarrow_forward
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