Cofission Electronics Make Small Electronic Parts

question 59

Multiple Choice

Cofission Electronics make small electronic parts. The management accountant at Cofission, Jasmine Vake, decides to implement an activity-based costing (ABC) system. She lists the following points to support her decision:
i. The recent cost report shows that the ratio of prime costs to manufacturing overhead cost is approximately 1:3
ii. Cofission is a small company.
iii. Cofission has three product lines: basic parts (parts that are common to many products and many suppliers) , customized parts (electronic parts that are highly customized to very specialized electric motors) , prototypes (where Cofission Electronics need to design as well as manufacture these specialized electronic parts) .
iv. Cofission Electronics has recently implemented a flexible manufacturing system; this practically eliminates any setup costs; with this system, product customization takes very little additional time.
You are not convinced that all of the above points support Jasmine's decision. Which of the above points contradict Jasmine's decision?

• A) i and ii
• B) ii
• C) i, ii and iv
• D) ii and iv

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Definitions:

Illusory Promise

A statement or promise that appears to assure a commitment but, upon closer inspection, lacks the necessary binding effect to be considered legally enforceable.

Breach Of Contract

A situation where one party fails to fulfill their obligations under a contract.

Adequacy Of Consideration

The fairness of the value exchanged in a contract, though not necessarily equal in monetary terms.

Court

An institution established by the government to settle disputes through a legal process, providing a forum where evidence is presented and legal judgments are made.