Asked by Hanoi Sanchez on May 17, 2024
Verified
Prepare a list of 14 possible indications that a new product costing system is likely to be needed.
Product Costing System
A framework used to determine the expense associated with producing a product, taking into account all direct and indirect costs.
Indications
Suggestions or signals that point towards a specific condition, trend, or action.
- Recognize the value and rationale behind the implementation of an Activity-Based Costing system within different organizational settings.
- Acknowledge the restrictions and complications involved in the deployment of ABC.
Verified Answer
TS
Tamlyn ShimizuMay 19, 2024
Final Answer :
1. Sales are increasing, but profits are decreasing.
2. Product lines are diverse.
3. Only a small percentage of total costs are in direct labour.
4. Competitors' high-volume products seem to be priced very low.
5. Line managers do not believe the product costs reported by the accounting department.
6. Product line profit margins are difficult to explain.
7. Line managers suggest that profitable products be dropped.
8. Competitors do not sell some of the products in which our system reports high profit margins.
9. Marketing personnel are unwilling to use reported product costs in making pricing decisions.
10. Complex products that are difficult to manufacture are reported to be very profitable, although they are not priced at a premium.
11. The firm seems to have captured a highly profitable product line for itself.
12. Overhead rates are very high and increasing over time.
13. It is difficult to explain bids won and bids lost.
14. The accounting department spends significant amounts of time on special costing projects to support bids or pricing decisions.
2. Product lines are diverse.
3. Only a small percentage of total costs are in direct labour.
4. Competitors' high-volume products seem to be priced very low.
5. Line managers do not believe the product costs reported by the accounting department.
6. Product line profit margins are difficult to explain.
7. Line managers suggest that profitable products be dropped.
8. Competitors do not sell some of the products in which our system reports high profit margins.
9. Marketing personnel are unwilling to use reported product costs in making pricing decisions.
10. Complex products that are difficult to manufacture are reported to be very profitable, although they are not priced at a premium.
11. The firm seems to have captured a highly profitable product line for itself.
12. Overhead rates are very high and increasing over time.
13. It is difficult to explain bids won and bids lost.
14. The accounting department spends significant amounts of time on special costing projects to support bids or pricing decisions.
Learning Objectives
- Recognize the value and rationale behind the implementation of an Activity-Based Costing system within different organizational settings.
- Acknowledge the restrictions and complications involved in the deployment of ABC.
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