Dreyson Manufacturing Sells a Number of Goods Whose Selling Price

question 42

Multiple Choice

Dreyson Manufacturing sells a number of goods whose selling price is heavily influenced by cost. A recent study of product no. 519 revealed a traditionally-derived total cost of $1,019, a selling price of $1,850 based on that figure, and a newly computed activity-based total cost of $1,215. Which of the following statements is true?

• A) All other things being equal, the company should consider a drop in its sales price.
• B) The company may have been extremely competitive in the marketplace from a price perspective.
• C) Product no. 519 could be labeled as being overcosted by the firm's traditional costing procedures.
• D) If product no. 519 is undercosted by traditional accounting procedures, then all of the company's other products must be undercosted as well.
• E) Generally speaking, the activity-based cost figure is "less accurate" than the traditionally-derived cost figure.

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Definitions:

Deductible

The amount paid out of pocket by the policyholder before an insurance provider pays any expenses.

Premium

An amount paid that is above the standard price or rate for an enhanced feature, service, or higher priority.

Insurance Companies

Financial institutions that provide coverage against specific losses in exchange for premiums.

Signaling

Taking some action to establish credibility despite possessing private information; a way to reduce adverse selection.