Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Textbook Question
Chapter 4, Problem 1DQ
Why would management be concerned about the accuracy of product costs?
Expert Solution & Answer
To determine
Explain the reason why the management would be concerned about the accuracy of product costs.
Explanation of Solution
Product costs
Product costs means to deciding the cost of the product. It consists of direct materials, direct labor, and factory overhead. Direct materials and direct labor are appears in direct costs that can be traced to the product, and factory overhead include indirect costs like indirect materials and indirect labor that should be allocated to the product.
Explain the reason why the management would be concerned about the accuracy of product costs as follows:
Management needs exact products costs, for that reason its decisions about products are correct. Managers are concerned about the precision of product costs, which are used for decisions such as determining the product mix, ascertaining the product price, and deciding whether to discontinue a product line or not.
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Chapter 4 Solutions
Managerial Accounting
Ch. 4 - Why would management be concerned about the...Ch. 4 - Why would a manufacturing company with multiple...Ch. 4 - Prob. 3DQCh. 4 - Prob. 4DQCh. 4 - How does activity-based costing differ from the...Ch. 4 - Prob. 6DQCh. 4 - Prob. 7DQCh. 4 - Under what circumstances might the activity-based...Ch. 4 - Prob. 9DQCh. 4 - Prob. 10DQ
Ch. 4 - Single plantwide factory overhead rate The total...Ch. 4 - Multiple production department factory overhead...Ch. 4 - Activity-based costing: factory overhead costs The...Ch. 4 - Activity-based costing: selling and administrative...Ch. 4 - Activity-based costing for a service business...Ch. 4 - Kennedy Appliance Inc.s Machining Department...Ch. 4 - Bach Instruments Inc. makes three musical...Ch. 4 - Scrumptious Snacks Inc. manufactures three types...Ch. 4 - Isaac Engines Inc. produces three productspistons,...Ch. 4 - Handy Leather, Inc., produces three sizes of...Ch. 4 - Eclipse Motor Company manufactures two types of...Ch. 4 - The management of Nova Industries Inc....Ch. 4 - Comfort Foods Inc. uses activity-based costing to...Ch. 4 - Nozama.com Inc. sells consumer electronics over...Ch. 4 - Hercules Inc. manufactures elliptical exercise...Ch. 4 - Lonsdale Inc. manufactures entry and dining room...Ch. 4 - Activity cost pools, activity rates, and product...Ch. 4 - Handbrain Inc. is considering a change to...Ch. 4 - Prob. 14ECh. 4 - Activity-based costing and product cost distortion...Ch. 4 - Prob. 16ECh. 4 - Evaluating selling and administrative cost...Ch. 4 - Prob. 18ECh. 4 - Prob. 19ECh. 4 - Activity-based costing for a service company...Ch. 4 - Bounce Back Insurance Company carries three major...Ch. 4 - Gwinnett County Chrome Company manufactures three...Ch. 4 - The management of Gwinnett County Chrome Company,...Ch. 4 - Activity-based and department rate product costing...Ch. 4 - Activity-based product costing Mello Manufacturing...Ch. 4 - Allocating selling and administrative expenses...Ch. 4 - Product costing and decision analysis for a...Ch. 4 - Single plantwide factory overhead rate Spotted Cow...Ch. 4 - Multiple production department factory overhead...Ch. 4 - Activity-based department rate product costing and...Ch. 4 - Activity-based product costing Sweet Sugar Company...Ch. 4 - Allocating selling and administrative expenses...Ch. 4 - Product costing and decision analysis for a...Ch. 4 - Life Force Fitness, Inc., assembles and sells...Ch. 4 - Prob. 2MADCh. 4 - Prob. 3MADCh. 4 - Production run size and activity improvement...Ch. 4 - Prob. 5MADCh. 4 - Ethics in Action The controller of Tri Con Global...Ch. 4 - Communication The controller of New Wave Sounds...Ch. 4 - Pelder Products Company manufactures two types of...Ch. 4 - The Chocolate Baker specializes in chocolate baked...Ch. 4 - Young Company is beginning operations and is...Ch. 4 - Cynthia Rogers, the cost accountant for Sanford...
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- Managers often assume a strictly linear relationship between cost and the level of activity.Under what conditions would this be a valid or invalid assumption?arrow_forwardWhy do managers consider direct costs to be more accurate than indirect costs?arrow_forwardWhy is it important to know the true cost for a product or service?arrow_forward
- Explain how the cost per equivalent unit might be misleading to managers, particularly when a significant change in production is anticipated.arrow_forwardWhat is cost stickiness? Why do managers need to be aware of cost stickiness?arrow_forwardIs there a way to prevent managers from focusing on accounting measures as performance measures?arrow_forward
- Overhead costs are the source of product cost distortions. Do you agree or disagree? Explain.arrow_forwardWhy are there objections to using absorption costing when segment reports of profitability are being prepared?arrow_forwardHow are nonfactory costs and costs that benefit both factory and nonfactory operations accounted for?arrow_forward
- Although the cost-plus approach to product pricing may be used by management as a general guideline, what are some examples of other factors that managers should also consider in setting product prices?arrow_forwardWhat advantage does the FIFO cost method have over the average cost method relative to providing information for cost control?arrow_forwardHow is a contribution margin determined, and why is it important to management?arrow_forward
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