Chapter 11 - ABC Flashcards
1
Q
What happens to companies that overcost products?
A
Most likely lose market share
2
Q
When refining a costing system, what should a company do to its cost?
A
Classify as many as possible as direct costs
3
Q
What does an effective activity-based cost system usually use?
A
In addition to unit-level drivers, it should use batch-level, product-sustaining, and facility-sustaining cost-drivers
4
Q
What is the use of a single indirect-cost likely to do?
A
Undercut low-volume complex products
5
Q
Criticisms of ABC
A
- Must be used with care - can suggest an inappropriate degree of variability
- Concept of unused capacity within the resource consumption model is questionable
- Reported costs may not significantly differ from a less costly traditional system if indirect costs are a low proportion of total costs
