LO 6.1What conditions are optimal for using traditional allocation? Is the allocation more effective when there is high-volume production?
LO 6.2College Cases sells cases for electronic devices such as phones, computers, and tablets. These cases have college logos or mascots on them and can be customized by adding such things as the customer’s name, initials, sport, or fraternity letters. The company buys the cases in various colors and then uses laser technology to do the customization of the letters and to add school names, logos, mascots, and so on. What are potential activity-based costing pools for College Cases, and what would be appropriate cost drivers?
LO 6.4Cape Cod Adventures makes foam noodles with sales of 3,000,000 units per year and retractable boat oars with sales of 50,000 pairs per year. What information would Cape Cod Adventures need in order to change from traditional to ABC costing? What are the limitations to activity-based costing?
LO 6.5In designing a bonus structure to reward your production managers, one of the options is to reward the managers based on reaching annual income targets. What are the differences between a reward system for a company that uses absorption costing and one for a company that uses variable costing?