Answer the Following Questions Using the Information Below

question 148

Multiple Choice

Answer the following questions using the information below:
Cannady produces six products. Under their traditional cost system using one cost driver, SR6 costs $168.00 per unit. An analysis of the activities and their costs revealed that three cost drivers would be used under the new ABC system. The new cost of SR6 was determined to be $178.00 per unit.
-Given this change in the cost ________.

• A) SR6 will now command a higher sales price
• B) SR6 has benefited from the new system
• C) SR6 is definitely more accurately costed
• D) the costing results for SR6 under the new system depend on the adequacy and quality of the estimated cost drivers and costs used by the system

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Definitions:

Initial Investments

The initial capital outlay required to start a project, purchase assets, or establish business operations.

Internal Rate

Refers to the calculation used to estimate the profitability of potential investments, specifically the internal rate of return (IRR) on a project.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used for analyzing the profitability of investments or projects.

Discount Rate

The interest rate used in discounted cash flow (DCF) analyses to determine the present value of future cash flows.