Ask Experts Questions for FREE Help !
Ask
    Redd_bone80's Avatar
    Redd_bone80 Posts: 3, Reputation: 1
    New Member
    		  
    #1

    Nov 21, 2009, 08:44 AM
    Homework Accounting
    ArvinMeritor, Inc. discovered that incorrect factory overhead cost allocations had "overcosted" some of its products by roughly 20%. As a result, these products were over-priced and began losing market share. Would you recommend the usage of activity based costing (ABC) as a superior method of allocating factory overhead costs? Why or why not?
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
    Uber Member
    		  
    #2

    Nov 22, 2009, 08:48 PM

    Please read the guidelines for posting homework problems:
    https://www.askmehelpdesk.com/financ...-b-u-font.html

    We are not here just to answer your homework for you. Especially when it wants to know what you would recommend, not what we would recommend.
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
    Senior Member
    		  
    #3

    Nov 23, 2009, 06:29 AM
    Quote Originally Posted by Redd_bone80 View Post
    ArvinMeritor, Inc. discovered that incorrect factory overhead cost allocations had "overcosted" some of its products by roughly 20%. As a result, these products were over-priced and began losing market share. Would you recommend the usage of activity based costing (ABC) as a superior method of allocating factory overhead costs? why or why not?
    ABC costing is more suitable where a company produces different types of products with different activities. Where the company produces only one product then ABC or traditional method will provide the same result.

    Check the current overhead allocation method. There may be some mistakes there in estimating overhead allocation rates.

    If you need a tutorial on Activity Based Costing you need to refer to a proper text book.

    http://www.principlesofaccounting.co...-BASED COSTING
Not your question? Ask your question View similar questions
 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

Accounting homework [ 1 Answers ]

Exercise 3-9 Applying Overhead in a Service Company Pearson Architectural Design began operations on January 2. The following activity was recorded in the company's Work in Process account for the first month of operations: Work in Process Costs of subcontracted work 90,000 To completed...

Accounting homework [ 3 Answers ]

O'Henry's Data Services Unadjusted Trial Balance November 30, 20XX Cash $9,700 Accounts receivable 7,900 Prepaid expenses 2,600 Furniture, fixtures, & equipment 151,300 Accumulated depreciation $15,600 Accounts payable 3,800 Salary payable Unearned service revenue 6,700 Benjamin...

Accounting homework [ 1 Answers ]

Federal unemployment tax .8 percent (.008) on the first $7,000 for each employee

Accounting homework [ 1 Answers ]

Directions: Record the necessary adjusting and reversing entries from the data presented. Eastman company present the following data at the end of its fiscal year on December 31,20xx. (a) The company holds a 60-day note dated dececember 21,20xx. The note has a face value of 15,000 and carries...

View more questions Search