Aqua Company Produces Two Products-Alpha and Beta

question 14

Multiple Choice

Aqua Company produces two products-Alpha and Beta. Alpha has a high market share and is produced in bulk. Production of Beta is based on customer orders and is custom designed. Also, 55% of Beta's cost is shared between design and setup costs, while Alpha's major portions of costs are direct costs. Alpha is using a single cost pool to allocate indirect costs. Which of the following statements is true of Aqua?

• A) Aqua will overcost Beta's direct costs as it is using a single cost pool to allocate indirect costs.
• B) Aqua will undercost Alpha's indirect costs because alpha has high direct costs.
• C) Aqua will overcost Alpha's indirect costs as it is using a single cost pool to allocate indirect costs.
• D) Aqua will overcost Beta's indirect costs because beta has high indirect costs.

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Definitions:

External Monitoring

The process of keeping watch over the environment outside an organization to identify opportunities and threats.

Competitive

Characterized by or showing a strong desire to be more successful than others.

Operating Procedures

Standardized methods and processes designed to consistently carry out day-to-day tasks and operations.

Management Programs

Structured plans and initiatives implemented within an organization to achieve specific operational, tactical, or strategic objectives.