Prime indicators of problems with a conventional costing system include company profits being eroded and production managers not being able to make sense of product costs.Prime indicators of problems with a conventional costing system include company profits being eroded and production managers not being able to make sense of product costs.TrueFalse

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Product cost refers to the cost or expense which is incurred for creating the product and this cost…

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Business

Accounting

Prime indicators of problems with a conventional costing system include company profits being eroded and production managers not being able to make sense of product costs. True False

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 1DQ: Why would management be concerned about the accuracy of product costs?

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Similar questions

Which of the following is NOT a problem associated with standard cost accounting? a. Standard costing motivates management to produce large batches of products and build inventory. b. Applying standard costing leads to product cost distortions in a lean environment. c. Standard costing data are associated with excessive time lags that reduce its usefulness. d. The financial orientation of standard costing may promote bad decisions. e. All of the above are problems with standard costing.
Why might relevant costs analysis be bad for a company if used too frequently? Multiple Choice It overemphasizes short-term goals and neglects long-term goals. It complicates the job of managers. It focuses too much on strategy and not enough on financial measures. It could lead to a permanent change in the production process of the company. It overemphasizes long-term goals and neglects short-term goals.
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.
A downside to absorption costing is: a) not including fixed manufacturing overhead in the cost of the product b) that it is not really useful for managerial decisions c) that it is not allowable under GAAP d) that it is not well designed for cost-volume-profit analysis
Cost accounting logic can lead managers to keep their resources busy all the time, increasing productivity with no regard to demand. What is the negative result of this effect?
Wrong allocation of common costs lead to A. Inaccurate estimation of cost of products or services B. Under utilization of capacity C. Lower profit margin D. All of the above are correct
Which of the following statements are false? SELECT ALL THAT APPLY a. One of the dangers of allocating common fixed costs to a product line is that such allocations can make the line appear less profitable than it really is. b. A new fixed cost that must be paid if a special offer is accepted is not relevant in making the decision. c. A cost that will be incurred regardless of which course of action a manager takes is relevant to the manager's decision. d. Your Company is considering replacing Machine X. The original cost of Machine X is not relevant to this decision.
Why is variable costing not in compliance with generally accepted accounting principles?a. Fixed manufacturing costs are assumed to be period costs.b. Variable costing procedures are not well known in industry.c. Net earnings are always overstated when using variable costing.d. Variable costing ignores the concept of lower of cost or market when valuing inventory.
Which 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 systems
When absorption costing is used a. management may be tempted to overproduce in a given period in order to decrease net income. b. for external reporting, variable costing can still be used for internal reporting purposes. c. it facilitates cost-volume-profit analysis. d. and production exceeds sales, absorption costing reports a lower net income than variable costing.
What of the following is NOT a Benefit of Activity Based Management? a.It assists in the budgeting process. b.It aids management in cost cutting and/or cost control and inferentially in product profitability. c.It causes managers to identify non-value added activities and therefore encourages thinking of means of reducing such activities. d.Is more complex than traditional accounting system because it uses multiple cost application rates, one for each activity or cost pool.
Which of the following is false regarding activity-based costing (ABC)? a. Companies that have a high potential for cost distortions are more likely to benefit from ABC b. Opportunities for continuous improvement are rarely revealed by using ABC. c. The cost of implementing ABC may outweigh the benefits d. Increased accuracy with budgeting resources is often realized