Answer the Following Questions Using the Information Below:
Nichols Inc

question 22

Multiple Choice

Answer the following questions using the information below:
Nichols Inc. manufactures remote controls. Currently the company uses a plant-wide rate for allocating manufacturing overhead. The plant manager is considering switching-over to ABC costing system and has asked the accounting department to identify the primary production activities and their cost drivers which are as follows:
$$\begin{array} { l r r } \text { Activities } & \text { Cost driver } & \text { Allocation Rate } \\\text { Material handling } & \text { Number of parts } & \$ 2 \text { per part } \\\text { Assembly } & \text { Labor hours } & \$ 20 \text { per hour } \\\text { Inspection } & \text { Time at inspectionstation } & \$ 3 \text { per minute }\end{array}$$ The current traditional cost method allocates overhead based on direct manufacturing labor hours using a rate of $200 per labor hour.
-Nichols' management is considering to implement ABC system because ________.

• A) ABC system can be implemented cheaply
• B) ABC system provides more accurate direct cost figures
• C) ABC system is a highly refined costing system
• D) ABC system requires minimal expertise to operate

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Definitions:

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