Only 4-6 Only 4-6 Alphabetical Numb Section Name Short Asswer Questions What are
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Only 4-6 Only 4-6 Alphabetical Numb Section Name Short Asswer Questions What are these steps? prodact's cost. I. Activity-based costing methods use four steps in compating a What is a cost driver? Give three examples J. The vice president of marketing woaders how products can cost less ender one cost system t How would you respond to ber qeestios "Aren't costs cut-and-dried? than under another A drawback to activity-based costing is that it requires more recard-keeping and extensive teamwork betweem all departments. What are the potential benefits of a more detailed produet cost system? S Give three criteria for choosing cost drivers for allocating costs to products 6. Activity-based costing assigns costs to activities that consume resources and the product's ase of activities. What is a benefit of this approach compared to a traditional approach that allocates costs to prodects hased on the machine-hours or labor bours used to produce the product? products based on eachExplanation / Answer
Q4) The allocation of overhead cost based on the most appropriate cost driver is ABC.
Benefits: (1) It gives recognition of each activity; suppose if a setup cost is partly depending on machine hours and partly on number of batches, then the allocation should be done on such detailing. (2) It gives mutual tracing between activity and cost. If one is found, the other could be found easily. (3) Since it gives detail cost structure, the decision making of management should be easier and accurate.
Q5) Criteria: (1) Identify the relation: A cost driver must have relation with cost object, such as salary payment to staffs is a cost object that is related to number of staffs. (2) Consistency: The cost driver must be consistent, since it should give effect year after year; if the number of staff is chosen as cost driver, it should not be changed for long period of time. (3) Fixed and variable elements of cost must be segregated and then the required driver should be chosen for appropriateness and betterment. Suppose the fixed part of salary depends on machine capacity and the variable part depends on number of staffs.
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