costacctg13_sm_ch05

It is importantthat the controller have the support

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Unformatted text preview: or service costs. If the exist ing cost pool is already homogeneous, increasing the number of cost pools will not increase accuracy. If the existing cost pool is not homogeneous, accurac y will increase only if the increased cost pools themselves increase in ho mogeneit y vis­a­vis the single cost pool. 5­15 The controller faces a difficult challenge. The benefits o f a better accounting syste m show up in improved decisio ns by managers. It is important that the controller have the support of these managers when seeking increased investments in account ing systems. Statements by these managers showing how their decis io ns will be improved by a better accounting system are the controller’s best arguments when seeking increased funding. For example, the new syste m will result in more accurate product costs which will influence pricing and product mix decisio ns. The new system can also be used to reduce product costs which will lower selling prices. As a result, the customer will benefit from the new system. 5­16 (20 min.) Cost hierarchy. 1. a. Indirect manufacturing labor costs of $1,2...
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