Question

Answer the following questions using the information below: Cannady produces six products. Under their traditional cost system using one cost driver, SR6 costs $168.00 per unit. An analysis of the activities and their costs revealed that three cost drivers would be used under the new ABC system. The new cost of SR6 was determined to be $178.00 per unit. Given this change in the cost ________.

Answer 1

Answer:

Given this change in the cost, the adequacy and quality of the estimated cost drivers and costs used by the system will determine the costing results for SR6 under the new system.

Explanation:

A cost driver can be described as the unit of an activity or any factor that makes the cost of an activity to fluctuate. An estimated cost driver is adequate and of the expected quality when quality or quantity is satisfactory or acceptable.

Therefore, given this change in the cost, the adequacy and quality of the estimated cost drivers and costs used by the system will determine the costing results for SR6 under the new system.