A Company's Management Accountant Is Trying to Improve the Way

question 79

Multiple Choice

A company's management accountant is trying to improve the way costs are allocated within the company. Currently, several corporate expenses are grouped together and labeled "overhead." If the accountant wanted to use activity-based costing (ABC) to help solve the problem, what should she do?

• A) She should try to trace the departments' costs to their cost objects, and then charge each department based on those cost relationships.
• B) She should research how the company's competitors are allocating their costs, and then implement one of those strategies.
• C) She should look for bottlenecks within the production process, and try to eliminate them, thus reducing costs.
• D) She should examine the firm's value chain and apply target costing before adopting ABC.

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Definitions:

Risk of Loss

The possibility that an asset's value could decrease due to changes in the market or other factors, affecting the holder's financial position.

Insurable Interest

A requirement that a person must stand to suffer a direct financial loss from the damage, loss, or destruction of the property or life insured.

Goods-in-bailment

Refers to personal property that has been delivered into the hands of another for custody or performance of some service, without transfer of ownership.

Economic Interest

A vested interest in financial gains or losses, typically relating to investments, ownership, or participation in business ventures or market activities.