Answer the Following Questions Using the Information Below

question 112

Multiple Choice

Answer the following questions using the information below:
Chess Woods Limited produces two products: wooden chess pieces and wooden inlaid chess boards. Under their traditional cost system using one cost driver (direct manufacturing labor hours) , the cost of a set of wooden chess pieces is $325.00. An analysis of the activities and their costs revealed that three cost drivers would be used under a new ABC system. These cost drivers would be equipment usage, storage area for the material, and type of woods used. The new cost of a set of chess pieces was determined to be $298.00 per set.
-The goal of a properly constructed ABC system is to ________.

• A) have the most accurate cost system
• B) identify more indirect costs
• C) develop the best cost system for an economically reasonable cost
• D) have separate allocation rates for each department

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Definitions:

Prompt Payment Discount

A discount offered to customers by suppliers as an incentive for early payment of their invoices within a specified period.

Foregone

Something missed or given up, often used in the context of opportunities or profits that were not realized.

Prime Rate

The interest rate that commercial banks charge their most credit-worthy customers, often used as a reference rate for various loans.

Revolving Credit

A credit facility that allows a company or individual to borrow up to a pre-approved limit, pay it back, and borrow again.