Cost Allocation and Activity-Based Costing
1. Indirect costs are allocated to (1) provide information for decision making, (2) reduce
frivolous use of common resources, (3) encourage evaluation of internally provided
services, and (4)
The Use of Cost Information in
Management Decision Making
1. These are the costs and revenues that differ between decision alternatives.
2. Sunk costs are the costs that have been incurred in prior periods. They are not incremental
QUESTION 1 12 points
The Ugenti Construction Company contracted to construct a warehouse building for
$2,600,000. Construction began in 2009 and was completed in 2010. Data relating to the
contract are summarized below:
Costs incurred during the
Pricing Decisions, Analyzing Customer Profitability,
and Activity-Based Pricing
The manager would estimate the quantity that could be sold at various prices. The
quantities would then be multiplied by the contribution margin per uni
1. Variable costs are costs that change in response to changes in activity (e.g., production or
sales activity). Fixed costs are costs that do not change in response to changes in activity.
2. A mixed cost i
Managerial Accounting in the Information Age
1. The goal of managerial accounting is to provide information needed for planning, control,
and decision making.
2. The planning and control process begins with the development of a plan. M