Answer:
Activity based costing says that we must not absorb the Overhead cost on the basis of one absorption basis as this overhead is not generated as a result of this absorption basis(Machine hrs or labor hours). This use of one absorption basis is inappropriate (not fair allocation). We must find a fair basis that drives this cost. Upon investigation the management found that the total overhead cost suppose which is $1,050,000 can be divided into three cost pools (parts) and each part has a cost driver(a basis of allocation) which can be used to allocate this cost.The costs in the ABC system are allocated to unit product on more fair basis than the tradition absorption costing which only assume one fair basis for allocation of overhead costs. ABC criticizes traditional costing technique for using only one basis for absorption of Overheads.
Now following example will help you in understanding the difference between Absorptiion Costing and Activity based costing.
Suppose both Mr. A and Mr. B drank 5 glasses of juices. Each glass of juice costs $4. According to the Traditional absorption costing technique each individual must pay:
(5 Juices/2)*$4=$10
But ABC says its unfair, use a more appropriate basis for cost allocation. So upon investigating we came to know that Mr. A drank 3 glasses of juice and Mr. B drank 2 glasses of juice. So Mr. A must pay $12(3*$4) and Mr. B must pay $8(2*$4). This is more appropriate or fair basis of absorbing the overhead cost to each individual and is Activity Based Costing.
Answer:
$59.00.
Explanation:
Because it is perpetual method we will check the inventory available at the moment of each sale.
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<u>First sale:</u>
Inventory Available Jan 1st 10 units at $4
sales 6 units COGS $4 = 24
<u>Second Sale:</u>
Inventory Available Jan 1st 4 units at $4 $16
Jan 17th 8 units at $5.5 $44
Total 12 untis at $60 = 60/12 = $5 per unit
sales 7 units COGS $5 = 35
Total COGS 35 + 24 = 59
Answer:
C. An operations costing system is the same as job order costing system except that materials are accounted for in the same way as they are in process costing system
Explanation:
Operation costing is a hybrid of both job costing and process costing which can either used for:
- products which use different materials initially but ends up using a common process for production that is same process for different group of products.
- product has identical processing initially for different group of products and ends up with more product specific procedures.
Answer:
a) Oligopoly
Explanation:
The oligopoly is a market structure which characterized by the presence of a few large companies producing homogeneous or differentiated products
In this market, there are few sellers plus there is also a barriers for entering the new firms in the market. Also, the prices are normally fixed in this market because due to the competitors as they are fear of price war
So in the given question, it indicated the oligopoly scenario
