​Vertical Contracts Aim to

question 80

Multiple Choice

​Vertical contracts aim to

• A)​Incentivize the manufacturers to undertake costly activities,which they may not realize the full benefits of on their own
• B)Incentivize the retailers to undertake costly activities,which they may not realize the full benefits of on their own
• C)Incentivize the retailer and the manufacturer to undertake activities that reduce profits for the supply chain
• D)​Both A&B

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Definitions:

Arbitrary Allocation

The distribution of indirect costs to specific cost objects without a clear or direct basis, often based on convenience or convention rather than actual usage or benefits derived.

Common Cost

A cost that is incurred to support a number of cost objects but that cannot be traced to them individually. For example, the wage cost of the pilot of a 747 airliner is a common cost of all of the passengers on the aircraft. Without the pilot, there would be no flight and no passengers. But no part of the pilot’s wage is caused by any one passenger taking the flight.

Variable Costing

A costing method that includes only variable production costs (costs that change with the level of output) in product costs, excluding fixed manufacturing overhead.

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.