full (absorption) costing approach
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“In decision making, full (absorption) costing approach has become entirely useless as it leads to wrong decisions”. Provide examples and evaluate the statement.
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Solved in 2 steps
- 1. What factors determine the relevance of information to decision making? 2. What are sunk costs, and why are they not relevant in making decisions? 3. What information is relevant in an outsourcing decision?Cost allocation is arbitrary, so there is nothing gained by it. We should report only the costs that we know are direct.” Do you agree? Why? Please be specific in supporting your position.In a decision analysis situation, which one of the following costs is generally not relevant to the decision?A. Differential cost.B. Avoidable cost.C. Incremental cost.D. Historical cost.
- Marginal costing can provide useful information for decision-making. However, there are limitations to its usefulness. Identify and briefly explain three of the limitations.”What is the benefit of identifying avoidable and unavoidable cost in decisionmaking process? Discuss. **Do not provide the benefit of avoidable cost and unavoidable cost. The question is asking the benefit of IDENTIFYING.Wrong allocation of common costs lead to A. Inaccurate estimation of cost of products or services B. Under utilization of capacity C. Lower profit margin D. All of the above are correct
- Demonstrate why expressing fixed costs on a per unit of activity basis is misleading and may result in faulty decisions.A disadvantage of absorption costing is A.) None of the answers are correct. B.) Both answers are correct. C.) That it is not useful in management's decision-making process. D.) That it might encourage inventory buildup when there is no demand. Please dont give plagiarised answers and give best explanationWhen using the general methods to estimate cost behavior, A. It is a good idea to use multiple methods so results can be compared B. Managers often apply their own best judgement as a first step in the estimation process C. Results are likely to differ from method to method D. Large differences in methods suggest that the cost cannot be estimated.
- One cost that is irrelevant in decision making is a sunk cost Group of answer choices True FalseWhich type of incurred costs are not relevant in decision-making (i.e., they have no bearing on future events) and should be excluded in decision-making? Group of answer choices A. avoidable costs B. unavoidable costs C. sunk costs D. differential costsCritics of absorption costing have increasingly emphasized its potential for leading to undesirable incentives for managers. Give an example.
