Starwatch Manufacturing Sells a Number of Goods Whose Selling Price

question 10

Multiple Choice

Starwatch Manufacturing sells a number of goods whose selling price is heavily influenced by cost. A recent study of product no. 520 revealed a traditionally-derived total cost of $1,623 and a selling price of $1,850 based on that figure. A newly computed activity-based total cost is $1,215. Which of the following statements is true?

• A) All other things being equal, Starwatch should consider increasing its sales price.
• B) Dawn should increase the product's selling price to maintain the same markup percentage.
• C) Product no. 520 could be labeled as being overcosted by Starwatch's traditional costing procedures.
• D) If product no. 520 is undercosted by traditional accounting procedures, then all of Starwatch's other products must be undercosted as well.
• E) Generally speaking, the activity-based cost figure is "less accurate" than the traditionally-derived cost figure.

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