Asked by kosaraju naveen kumar on May 17, 2024
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Cofission Electronics make small electronic parts. The management accountant at Cofission, Jasmine Vake, decides to implement an activity-based costing (ABC) system. She lists the following points to support her decision:
i. The recent cost report shows that the ratio of prime costs to manufacturing overhead cost is approximately 1:3.
ii. Cofission is a small company.
iii. Cofission has three product lines: basic parts (parts that are common to many products and many suppliers) , customised parts (electronic parts that are highly customised to very specialised electric motors) , prototypes (where Cofission Electronics need to design as well as manufacture these specialised electronic parts) .
iv. Cofission Electronics has recently implemented a flexible manufacturing system; this practically eliminates any setup costs; with this system, product customisation takes very little additional time.
You are not convinced that all of the above points support Jasmine's decision. Which of the above points support the use of ABC in Cofission?
A) i, ii and iii
B) ii, iii and iv
C) i and iii
D) iii and iv
Prime Costs
The combined costs of direct materials and direct labor which are directly attributable to the production of goods.
Activity-based Costing
An accounting method that assigns costs to products or services based on the activities and resources used to produce them.
Specialized Electric Motors
Electric motors that are designed and manufactured for specific applications or to meet particular requirements, distinguishing them from standard or generic motors.
- Identify the conditions under which activity-based costing (ABC) is more applicable than traditional costing systems.
Verified Answer
Learning Objectives
- Identify the conditions under which activity-based costing (ABC) is more applicable than traditional costing systems.
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