Explain the implementation issues with Activity Based Costing including: -lack of clear business purpose -lack of senior management commitment -delegating the project to consultants -poor ABC model design

Explain the implementation issues with Activity Based Costing including: -lack of clear business purpose -lack of senior management commitment -delegating the project to consultants -poor ABC model design

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

Explain the implementation issues with Activity Based Costing including:

-lack of clear business purpose

-lack of senior management commitment

-delegating the project to consultants

-poor ABC model design

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Similar questions

Which of the following statements is false? A. The departmental and traditional costing methods create cost distortions when there is significant costs associated with batch activities. B. The manufacturing overhead is applied to product by applying the POHR to actual cost drivers that occur during the production period C. The activity based costing system provides the most accurate product costing results D. Actual manufacturing overhead costs and the actual cost driver amounts are used to create the predetermined overhead rate (POHR)
Please do not give solution in image format thanku
Manufacturing Decisions Whenever the units manufactured differ from the units sold, finished goods inventory is affected. In analyzing operating income, such increases and decreases could be misinterpreted as operating efficiencies or inefficiencies. Each decision-making situation should be carefully analyzed in deciding whether absorption or variable costing reporting would be more useful. All costs are controllable in the long run by someone within a business. For a given level of management, costs may be controllable costs or noncontrollable costs. The production manager for Saxon, Inc. is worried because the company is not showing a high enough profit. Looking at the income statements on the Absorption Statement and the Variable Statement, he notices that the operating income is higher on the absorption cost income statement. He is considering manufacturing another 10,000 units, up to the company’s capacity for manufacturing, in the coming year. He reasons that this will boost…
Explain how absorption costing can enable a manager to increase production solely for the purpose of inflating profit but prevents a manager from doing this if variable costing is used.
Organizations are motivated to use multiple indirect cost pools instead of a single indirect cost pool when Select one: O a. Multiple Indirect cost pools are needed to conform to external reporting requirements b. manufacturing overhead costs are difficult to control c. the cost drivers for the multiple indirect cost pools are different from the cost driver of the single indirect cost pool d. none of the options
Briefly discuss two methods of reducing the undesirable incentives associated with the use of absorption costing to evaluate the performance of a plant manager.
“In decision making, full (absorption) costing approach has become entirely useless as it leads to wrong decisions”. Provide examples and evaluate the statement.
Which of the following statements regarding activity-based costing (ABC) is NOT correct? a. Under ABC cost centres are replaced by cost pools b. Blanket overhead recovery rates (OAR) are replaced with cost driver rates c. ABC uses one common overhead recovery rate, such as labour hours. d. ABC tackles the problems of absorption costing by adopting a much more accurate way of charging overhead to cost units.
Briefly explain the potential negative consequences in pricing decisions from using a traditional, volumebased product-costing system.
Do not give answer in image... explain your answer please
TRUE OR FALSE Activity center is a unit in an organization for which management wants the costs of a set of activities be reported separately.
What from the upcoming options will be made when using the traditional costing method, relatively to using the ABC costing method? Pick only one answer – Underestimating the products cost with products that have low direct costs, and one-time products that are produced in small series. A tight costing connection between the cost and the factor causing it. All the answers are incorect. A higher cost for implementing and managing the accounts managing system, the general and the costing. Overestimating the products cost with products that have low direct costs, and one-time products that are produced in small series.