Cofission Electronics Make Small Electronic Parts

question 10

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 these 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:

MPC

The marginal propensity to consume, which is the proportion of any additional income that is spent on consumption rather than being saved.

MPS

Marginal Propensity to Save, which measures the proportion of additional income that households save rather than spend on consumption.

APS

The Average Propensity to Save, which is the proportion of income that households save rather than consume.

MPC

The marginal propensity to consume, which is the portion of additional income that a consumer spends on goods and services.