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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402 Exercise 7
Approximately Relevant ABC
Silven Company has identified the following overhead activities, costs, and activity drivers for the coming year:
Silven produces two models of cell phones with the following expected activity demands:
Required:
1. Determine the total overhead assigned to each product using the four activity drivers.
2. Determine the total overhead assigned to each model using the two most expensive activities. The costs of the two relatively inexpensive activities are allocated to the two expensive activities in proportion to their costs.
3. Using ABC as the benchmark, calculate the percentage error and comment on the accuracy of the reduced system. Explain why this approach may be desirable.
Silven Company has identified the following overhead activities, costs, and activity drivers for the coming year:
Silven produces two models of cell phones with the following expected activity demands:
Required:
1. Determine the total overhead assigned to each product using the four activity drivers.
2. Determine the total overhead assigned to each model using the two most expensive activities. The costs of the two relatively inexpensive activities are allocated to the two expensive activities in proportion to their costs.
3. Using ABC as the benchmark, calculate the percentage error and comment on the accuracy of the reduced system. Explain why this approach may be desirable.
Explanation
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We are given the overhead activities, co...
Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
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