Questions from Cost Accounting

Q: If cost allocations are arbitrary and potentially misleading, why do companies

If cost allocations are arbitrary and potentially misleading, why do companies, including successful ones, continue to allocate costs?

Q: One critic of cost allocation noted, “You can avoid the

One critic of cost allocation noted, “You can avoid the problem of arbitrary cost allocations by not allocating any common costs to other cost objects.” What are your thoughts on this comment?

Q: If the reciprocal method is conceptually superior, why don’t all firms

If the reciprocal method is conceptually superior, why don’t all firms use it?

Q: Service department cost allocation is the first stage in a two-

Service department cost allocation is the first stage in a two-stage system. Suppose a company has a purchasing department that is responsible for buying all materials, including miscellaneous supplie...

Q: Throughout the chapter, we treated conversion costs (direct labor and

Throughout the chapter, we treated conversion costs (direct labor and manufacturing overhead) as a single resource. Why could we do this without distorting the resulting costs? When would we need to t...

Q: Consider the Business Application feature “Technology, Data Analysis, Customer

Consider the Business Application feature “Technology, Data Analysis, Customer Profitability, and Cost of Quality.” Do you think it is easier to estimate the cost savings from adapting a lean manufact...

Q: In the chapter, we said that the costs from a prior

In the chapter, we said that the costs from a prior department are often excluded when comparing a department’s cost with its standards or budgets. However, when a department buys materials from an ou...

Q: Consider a manufacturing firm with multiple departments all using continuous production processes

Consider a manufacturing firm with multiple departments all using continuous production processes and process costing. Suppose Department A transfers product to Department B for completion to the fina...

Q: Consider two firms in the same industry. Is it possible that

Consider two firms in the same industry. Is it possible that one uses job costing and the other uses process costing? Explain.

Q: A firm produces a product by sending it through three production departments

A firm produces a product by sending it through three production departments (A, B, and C). A uses job costing, B uses operations costing, and C uses process costing. Is this possible? Why? Is this li...