Nichols Inc. manufactures remote controls. Currently the company uses a plant-wide rate for allocating manufacturing overhead. The plant manager is considering switching-over to ABC costing system and has asked the accounting department to identify the primary production activities and their cost drivers which are as follows:
The current traditional cost method allocates overhead based on direct manufacturing labor hours using a rate of $30 per labor hour.
Nichols' management is considering to implement ABC system because ________.
Definitions:
Mastoid
A part of the temporal bone of the skull, located behind the ear, containing air cells that help regulate ear pressure.
Left Ear
The hearing organ located on the left side of the head, responsible for detecting sound.
Productivity Growth
An increase in the efficiency of production, often measured by the output of goods and services per unit of input over time.
Savings Rate
The percentage of money that individuals or households save from their disposable income.
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