ACCT 3130 Chapter 5

Simple Methods:

• Can be inaccurate

  Example:

  Pre-Determined OH Rate

• Usually more accurate Example: Activity Based Costing

• Can be inaccurate Example: Activity Based Costing

• Usually more accurate Example: Pre-Determined OH Rate

Complex Methods--more refined cost systems:

• Can be inaccurate

  Example:

  Pre-Determined OH Rate

• Usually more accurate Example: Activity Based Costing

• Can be inaccurate Example: Activity Based Costing

• Usually more accurate Example: Pre-Determined OH Rate

Which product ends up higher than actual?

• Product A

• Product B

• Both

Which product ends up lower than actual?

• Product A

• Product B

• Both

Which product is overcosted?

• Product A

• Product B

• Both

Which product is undercosted?

• Product A

• Product B

• Both

A product that is overcosted...

• is using fewer resources

• is using more resources

A product that is undercosted...

• is using fewer resources

• is using more resources

Products using fewer resources are overcosted and products using more resources are undercosted. This is the problem with ____ ____.

If one product is undercosted, then AT LEAST one other product must be overcosted.

• True

• False