(c) Which of the following statements are true? (You may select more than one answer. Single click the box with the question markto produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wronganswer. Any boxes left with a question mark will be automatically graded as incorrect.)If a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin underactivity based costing will decrease.If a customer orders more frequently, but orders the same total number of units over the course of a year, the product margin under atraditional costing system will decrease.kntIf a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin underactivity based costing will be unaffected.encesIf a customer orders more frequently, but orders the same total number of units over the course of a year, the product margin under atraditional costing system will be unaffected.3. OfficeMart has found an error in its data. The percentage of selling and administrative overhead attributable to processing orders< Prevof 2Nextaw11:12/24/DELL (c) Which of the following statements are true about what happens when the percentage of selling and administrative overheadattributable to processing orders declines and the percentage of selling and administrative overhead attributable to supportingcustomers increases by the same amount? (You may select more than one answer. Single click the box with the question mark toproduce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.Any boxes left with a question mark will be automatically graded as incorrect.)When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling andadministrative overhead attributable to supporting customers increases by the same amount, costs are shifted from the processing orders costpool to the supporting customers cost pool.When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling andadministrative overhead attributable to supporting customers increases by the same amount, costs will be shifted from customers who ordermore frequently to those who order less frequently.cesWhen the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling andadministrative overhead attributable to supporting customers increases by the same amount, the customer margins of those who order morefrequently will increase relative to the customer margins of those who order less frequently.< Prevof 2Next>..... Ras.. .·.11:19DELL2/24/20...

Answered: (c) Which of the following statements…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

(c) Which of the following statements are true about what happens when the percentage of selling and administrative overhead
attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting
customers increases by the same amount? (You may select more than one answer. Single click the box with the question mark to
produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.
Any boxes left with a question mark will be automatically graded as incorrect.)
When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and
administrative overhead attributable to supporting customers increases by the same amount, costs are shifted from the processing orders cost
pool to the supporting customers cost pool.
When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and
administrative overhead attributable to supporting customers increases by the same amount, costs will be shifted from customers who order
more frequently to those who order less frequently.
ces
When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and
administrative overhead attributable to supporting customers increases by the same amount, the customer margins of those who order more
frequently will increase relative to the customer margins of those who order less frequently.
< Prev
of 2
Next>
..... Ras.. .·.
11:19
DELL
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Expert Solution

Step 1

First let us understand what is traditional costing method and what is activity based costing method. Both of these are methods to allocation of overheads to the cost of production. As we know that direct costs are directly identifiable with every unit produced. But the indirect cost i.e overheads are the general total costs which are to be allocated taking some logical base.

The traditional costing method uses only one cost driver for the allocation of overhead costs whereas the ABC method uses various cost drivers. Like under traditional costing the total overhead costs are applied based on machine hours or labour hours for each product. Under traditional costing the various overhead costs are allocated based on identified cost drivers like

The production overhead can be allocated based on number of machine setups
The material overhead can be allocated based on raw material requisition
The assembly overhead cost can be allocated based on the direct labour hours
Customer handling costs can be allocated based on the number of customer orders.
Inspecting costs can be divided based on inspection hours
Customer service cost can be divided based on the customers served.