Many Traditional Product Costing Systems

question 63

Multiple Choice

Many traditional product costing systems:

• A)trace manufacturing overhead to individual activities and require the development of numerous activity-costing rates.
• B)write off manufacturing overhead as an expense of the current period.
• C)combine widely varying elements of overhead into a single cost pool.
• D)use a host of different cost drivers (e.g., number of production setups, inspection hours, orders processed) to improve the accuracy of product costing.
• E)produce results far superior to those achieved with activity-based costing.

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Definitions:

Equivalent Annual Annuity

A calculation used to compare the returns of investments with different payment schedules by converting them into an equivalent sum received at regular annual intervals.

Cost Of Capital

The minimum rate of return that a business must earn before generating value, representing the opportunity cost of investing resources in a specific company instead of elsewhere.

Cash Flow

The aggregate amount of cash and similar liquid assets flowing into and away from a business entity.

Labor Force Participation Rates

A measure of the active portion of an economy's labor force, indicating the percentage of people who are either working or actively looking for work.