Cost allocation bases are ideally based on a cause and effect basis. That is not always easy when allocating fixed costs. Why might this be s

Q: What is meant by an activity base when dealing with variable costs? Give several examples of…

A:

Q: Marginal Costing

A: Option a is wrong because marginal costing is not a technique of cost reduction. Cost reduction…

Q: Why would someone use variable costing over absorption Costing ?

A: The variable costing method is the method that only includes the variable costing whereas,…

Q: Why is there a need to separate mixed cost as to variable & fixed cost?

A: Variable cost: these are the costs which vary with the units produced. These costs increase by…

Q: “In accounting for spoiled units, we are dealing with cost assignment rather than cost…

A: Explain the reason in accounting for spoiled units are done with cost assignment rather than cost…

Q: What is the similarity of fixed costs with variable costs and its differences.

A: similarities and differences of fixed cost and variable cost are discussed in step 2

Q: Problems with a fixed cost that is incurred only if an activity is undertaken at a positive level…

A: If there is a conduct of any activity at any positive level then it incurs an amount of fixed cost…

Q: "ABC systems may result in misallocation of indirect costs." Do you agree? Give reasons for your…

A: ABC system means Activity Based Costing system in which all indirect costs or overhead costs are…

Q: activity-based costing systems have a tendency to distort product costs. True or False?

A: The overhead is applied to the production on the basis of predetermined overhead rate. The…

Q: relevant and irrelevant cost

A: Relevant and irrelevant costs are categories of costs based on their effect on decision making.

Q: An asset is purchased for P9,000. Its estimated life is 10 years after which it will be sold for…

A: Solution:- Calculation of Depreciation as follows under:-

Q: Cost allocation is arbitrary, so there is nothing gained by it. We should report only the costs that…

A: Cost allocation refers to the process of distributing the single cost among various companies,…

Q: Why are some quality costs hard to measure?

A: Quality Cost: The quality cost refers to the costs associated with the prevention and detection of…

Q: What is the primary disadvantage of basing the costplus pricing formula on absorption cost?

A: Definition: Cost plus-pricing approach: The pricing approach used by the companies to set the target…

Q: What does it mean to externalize costs?

A: Externalizing costs means generating profits by reducing the indirect costs by imposing them on…

Q: The reason for some costs to be mixed in nature is: Presence of sunk cost in the cost structure.…

A: Mixed Cost:- This cost is a combination of the fixed cost and variable cost. It means that one…

Q: In order to have differential costs, only variable costs are allowed. Do you think so? Explain.

A: In case of different alternatives available for production, the difference between two alternatives…

Q: What circumstances might create distortions where estimated costs are not an accurate representation…

A: The estimated costs are the costs determined through the estimation process on past…

Q: Why can unitized fixed costs cause errors in decision making?

A: Decision making process: Decision making process requires an understanding of a grasp of illegal…

Q: What is an outlier? List some possible causes of outliers. How should outliers be handled in cost…

A: Outlier: An outlier is a data point that falls far away from the other points in the scatter diagram…

Q: The cost that is used for the benefit of many cost objects and cannot be easily related to any…

A: Answer is as follows

Q: Why is it important to establish appropriate cost pools?

A: Activity cost pools are used in activity based costing which attempts to absorb overheads in a more…

Q: Only variable costs can be differential costs. Do you agree? Explain

A: Answer

Q: Direct costs are classified by controllability.    True False Can be true, can be false

A: Direct costs are those costs which are directly incurred for purchase or production of goods in the…

Q: cost constraint'

A: There are certain financial information ascertainment of which is very expensive. So reporting of…

Q: Why functional (or volume)- based costing approaches may produce distorted costs.

A: In a functional-based cost accounting system, costs are allocated to cost objects using unit-based…

Q: Differences in operating income between variable costing and absorption costing are due solely to…

A: Absorption costing: It refers to the method of product costing in which the price of the product is…

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.