Dreyson Manufacturing Sells a Number of Goods Whose Selling Price

question 94

Multiple Choice

Dreyson Manufacturing sells a number of goods whose selling price is heavily influenced by cost.A recent study of product no.519 revealed a traditionally-derived total cost of $1,019,a selling price of $1,850 based on that figure,and a newly computed activity-based total cost of $1,215.Which of the following statements is true?

• A)All other things being equal,the company should consider a drop in its sales price.
• B)The company may have been extremely competitive in the marketplace from a price perspective.
• C)Product no.519 could be labeled as being overcosted by the firm's traditional costing procedures.
• D)If product no.519 is undercosted by traditional accounting procedures,then all of the company's other products must be undercosted as well.
• E)Generally speaking,the activity-based cost figure is "less accurate" than the traditionally-derived cost figurE.

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Definitions:

Accounting Depreciation

Represents the systematic allocation of the depreciable amount of an asset over its useful life, reflecting the wear and tear, obsolescence, or other declines in value as an expense in the income statement.

Company Tax Rate

The rate at which a corporation's income is taxed by the government.

Current Tax Liability

The amount of income taxes a company is obligated to pay to governmental authorities within the next fiscal period.

Tax Deductible

Tax deductible refers to certain expenses or investments that can be subtracted from gross income to reduce the amount of income subject to tax.