What Might Explain Why Some Managers Advocate Fully Allocating All

question 120

Multiple Choice

What might explain why some managers advocate fully allocating all costs, including corporate costs to distribution channels and to customers?

• A) all costs are incurred to support sales of products to customers
• B) division managers can influence and control corporate costs
• C) distribution channel managers can control corporate costs
• D) all costs need to be considered to conduct adequate variance analysis

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Definitions:

Ending Work in Process Inventory

The value of goods that are partially completed at the end of an accounting period, which have not yet been transferred to finished goods inventory.

Units Transferred Out

The total quantity of items that have completed the production process and are moved out of the work-in-process stage.

Process Costing System

An accounting method used when identical products are mass-produced, assigning costs to units of product based on the process they undergo.

Overhead Allocated

The process of distributing overhead costs to specific products, services, or departments based on a predetermined rate or method.