Unformatted text preview: hase in the new prices. 4. Other than for pricing, AP can also use the informat ion fro m the departmentbased system to examine and streamline its own operations so that there is maximum valueadded fro m all indirect resources. It might set targets over time to reduce both the consumption of each indirect resource and the unit costs of the resources. The departmentbased system gives AP more opportunities for targeted cost management. 58 5. It would not be worthwhile to further refine the cost system into an ABC system if there wasn’t much variation amo ng contracts in the consumpt ion o f activit ies wit hin a department. If, for example, most activit ies wit hin the design department were, in fact, driven by CADdesign hours, then the more refined system would be more costly and no more accurate than the departmentbased cost system. Even if there was sufficient variat ion, considering the relat ive sizes o f the 3 department cost pools, it may only be costeffect ive to further analyze the engineering cost pool, which consumes 78% ($240,000 ¸ $308,600) of the manufacturing overhead. 520...
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This note was uploaded on 10/11/2010 for the course ACCT 321 taught by Professor Cole during the Spring '10 term at University of Miami.
- Spring '10
- Cost Accounting