Nichols Inc. manufactures remote controls. Currently the company uses a plant-wide rate for allocating manufacturing overhead. The plant manager is considering switching-over to ABC costing system and has asked the accounting department to identify the primary production activities and their cost drivers which are as follows:

The current traditional cost method allocates overhead based on direct manufacturing labor hours using a rate of $30 per labor hour.
Nichols' management is considering to implement ABC system because ________.
A) ABC system can be implemented cheaply
B) ABC system provides more accurate direct cost figures
C) ABC system is a highly refined costing system
D) ABC system requires minimal expertise to operate

Question

Nichols Inc. manufactures remote controls. Currently the company uses a plant-wide rate for allocating manufacturing overhead. The plant manager is considering switching-over to ABC costing system and has asked the accounting department to identify the primary production activities and their cost drivers which are as follows:

The current traditional cost method allocates overhead based on direct manufacturing labor hours using a rate of $30 per labor hour.
Nichols' management is considering to implement ABC system because ________.
A) ABC system can be implemented cheaply 
B) ABC system provides more accurate direct cost figures 
C) ABC system is a highly refined costing system 
D) ABC system requires minimal expertise to operate

Quizplus · Accepted Answer

The Answer of Nichols Inc. manufactures remote controls. Currently the company uses a plant-wide rate for allocating manufacturing overhead. The plant manager is considering switching-over to ABC costing system and has asked the accounting department to identify the primary production activities and their cost drivers which are as follows:

The current traditional cost method allocates overhead based on direct manufacturing labor hours using a rate of $30 per labor hour.
Nichols' management is considering to implement ABC system because ________.
A) ABC system can be implemented cheaply 
B) ABC system provides more accurate direct cost figures 
C) ABC system is a highly refined costing system 
D) ABC system requires minimal expertise to operate