Applying fixed costs to products seems to cause all kinds of problems. Why do companies continue to use accounting systems that assign fixed costs to products on a per unit basis?
Answer to relevant QuestionsProduct pricing and promotion decisions should usually be based on their effect on contribution margin, not on gross margin. Explain how using an absorption costing format for the income statement can provide misleading ...Tammy’s Cosmetics uses a normal costing system and has the following balances at the end of its first year’s operations.WIP inventory ....... $231,000Finished-goods inventory ... 198,000Cost of goods sold ..... ...Refer to the chapter discussion of Enriquez Machine Parts Company beginning on page 534. Suppose Enriquez decided to use only one overhead cost pool for both departments with machine hours as the single cost-allocation ...The Durant Company is installing an absorption standard-cost system and a flexible-overhead budget. Standard costs have recently been developed for its only product and are as follows:Direct materials, 3 pounds at $20 ...... ...The Calais Company stresses competition between the heads of its various divisions, and it rewards stellar performance with year-end bonuses that vary between 5% and 10% of division net operating income (before considering ...
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