The Controller for Shutterbug Photographic Supply Has Established the Following

question 11

Essay

The controller for Shutterbug Photographic Supply has established the following cost pools and cost drivers:
A.Determine the order's target price by using the activity-cost pools.
B.Assume that Halifax used a single,combined overhead rate based on weight of raw materials.
1.Determine the predetermined overhead rate.
2.Determine the expected cost of the order.
3.Determine the target price.
C.The activity-based approach ("A")makes more specific use of the order's characteristics (and cost drivers).While this order would represent 32% of the expected direct materials usage,the order would require only 8% of the setups,0% of the hazardous waste,0.4% of the inspections,and 2% of the machine hours.No overhead application method based on any single variable can reflect all this diversity in resource consumption.
C.Which approach above ("A" or "B")seems to be a more reasonable method to establish target prices? Explain.

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Definitions:

Population's Statistical Distribution

A mathematical function that describes the likelihood of various outcomes in a population.

Population Size

The total number of individuals within a defined area or group for the purposes of study or measurement.

Population Behaviour

The collective actions, reactions, and interactions among individuals within a community or group.

Poisson Distributions

A statistical distribution that expresses the probability of a given number of events occurring in a fixed interval of time or space if these events occur with a known constant rate and independently of the time since the last event.