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Onxy Onxy
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7 years ago
The auditor at the Yarn Shoppe needs to determine whether it is beneficial to implement a simple costing system using a single indirect-cost pool, or an ABC system. Review and compare the following information:

   Simple Costing System Using a Single Indirect-Cost Pool
(1)   
ABC System
(2)   
Difference
(3) = (2) — (1)
Direct-cost categories   2
Direct materials
Direct manufacturing labor   3
Direct materials
Direct manufacturing
  labor
Direct yarn cleaning
  and maintenance
  labor   1
Total direct costs
Indirect-cost pools   $2,500,500
   $2,800,000   $299,500
Indirect-cost pools   1   6   5

Required:
The goal of the accountant is to trace more costs as direct costs, create a homogeneous cost pool, and to implement a cost-allocation base that has a cause-and-effect relationship with costs in the cost pool. Which system should the auditor at the Yarn Shoppe implement? Why?
Textbook 
Managerial Accounting: Decision Making and Motivating Performance

Managerial Accounting: Decision Making and Motivating Performance


Edition: 1st
Authors:
Read 90 times
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lordingtonlordington
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Onxy Author
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6 years ago
You're the best tutor I ever had
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4 years ago
thank you
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