ACFI2003 WEEK3.docx - Tutorial 2 1. Lanen et al., (2017):...

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Tutorial 21. Lanen et al., (2017): Review Q. 9-3, p. 353.False. Plantwide use one cost pool for the entire plant. It uses one overhead allocation rate, or one set of rates, for all of a plant’s departments.Department allocation that has a separate cost pool for each department, which has its own overhead allocation rate or set of rates.Department allocation is a two-stage process, so the first-stage assignment of costs and the choice of cost drivers affects the allocation of costs to products. The total product costs are the same under either approach, but the individual product costs differ. This can affect the decisions managers make regarding individual products.2. Lanen et al., (2017): Review Q. 9-6, p. 353..(1)Identify the activities(2)Identify the cost drivers associated with each activity. A cost driver causes, or“drivers,” an activity’s costs. For the order-processing activity, the cost driver could be the number of orders.(3)Compute a cost rate per cost driver unit or transaction.

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