At a Recent Professional Meeting, Two Controllers Discussed Product-Costing Problems

question 7

Essay

At a recent professional meeting, two controllers discussed product-costing problems in their respective companies. Both controllers are familiar with ABC systems, but neither of their firms utilizes such a system.
Controller D reported that part of the problem in his firm results from major differences among product lines with respect to unit volume, utilization of activities, quality assurance requirements established by customers, and product size. Controller M noted that in her company, which manufactures consumer goods, all items undergo the same basic production processes in the same sequence. Lately, however, there has been a significant increase in the number of item colors.
Both controllers are worried about the potential distortion of product costs under their traditional product-costing systems.
Required:
Which controller should be more concerned about the potential distortion? Explain.

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Definitions:

Creativity Test

An assessment designed to measure the ability to generate new, original, or unique ideas.

Final Score

The concluding or ultimate numerical value indicating the result of an examination, game, or evaluation.

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A statistical method used to describe variability among observed, correlated variables in terms of potentially lower number of unobserved variables, called factors.

Variables

Elements, features, or factors that are liable to vary or change.