Asked by Yenill Jacalan on Jun 10, 2024
Verified
Which of the following are indicators of an outdated costing system?
i. Products which are difficult to make have high profit margins.
ii. Competitors prices appear unrealistically low.
iii. Customers are not deterred by price increases.
iv. A lot of time is spent on special product cost projects.
A) i, ii and iii
B) ii, iii and iv
C) i, iii and iv
D) i, ii, iii and iv
Outdated Costing System
A costing system that no longer accurately reflects the current production operations or costs, leading to misinformed pricing or investment decisions.
Profit Margins
The percentage of revenue that remains as profit after all expenses have been deducted from sales.
Special Product Cost Projects
Involves the detailed analysis and calculation of costs associated with creating a product that is unique or outside the standard product line.
- Analyze the consequences of having diverse products on their costing processes under Activity-Based Costing methodology.
- Pinpoint the obstacles and difficulties in embracing activity-based costing practices in organizational settings.
Verified Answer
AD
Alfredo DominguezJun 13, 2024
Final Answer :
D
Explanation :
All four indicators suggest an outdated costing system. Products that are difficult to make but still have high profit margins may indicate that the costing system is not accurately capturing the complexity and cost of production. Competitors' prices appearing unrealistically low could suggest that the company's costing system is not competitive or accurate. Customers not being deterred by price increases might indicate that the prices are not set based on a current understanding of value and costs. Spending a lot of time on special product cost projects suggests inefficiencies and inaccuracies in the standard costing system, necessitating frequent adjustments.
Learning Objectives
- Analyze the consequences of having diverse products on their costing processes under Activity-Based Costing methodology.
- Pinpoint the obstacles and difficulties in embracing activity-based costing practices in organizational settings.