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Unformatted text preview: c. Which of the two methods produces more accurate estimates of job costs? Explain. The activity-based costing method produces more accurate estimates of job costs. This is because ABC systems, instead of using cost centers, use activities for accumulating costs. Analysts can obtain a better estimate for the cost of resources required to handle each production run by dividing activity expenses by the practical capacity, not the capacity actually used, of the resources performing the work. Knowing practical capacity, the analyst can calculate a more accurate unit cost for an activity, such as handling production runs. d. Suppose Endo has been setting its product prices by adding a 25% markup to its reported product cost. Compute the product prices on the basis of the costs computed in parts (a) and (b). What do you recommend to Endo regarding its pricing? The product prices on the basis of the costs computed in parts(a) is lower than in parts (b). Endo should use an activity-based cost study of the companys marketing, selling, distribution and administrative...
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- Spring '11