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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.

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