Cases for Management Decision-Making

In: Business and Management

Submitted By yayaelaine
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Answer the following questions.
1. Identify two reasons why an activity-based costing system may be appropriate for Wall
Décor.
2. Compute the activity-based overhead rates for each of the four activities.
3. Compute the product cost for the following three items using ABC. (Review Case 1 for additional information that you will need to answer this question.)
(a) Lance Armstrong unframed print (base cost of print $12).
(b) John Elway print in steel frame, no mat (base cost of print $16).
(c) Lambeau Field print in wood frame with mat (base cost of print $20). case 2 Cases for Management Decision-Making Greet ings CA-9
4. In Case 1 for Greetings, the overhead allocations using a traditional volumebased approach were $3.36 for Lance Armstrong, $4.48 for John Elway, and $5.60 for
Lambeau Field. The total product costs from Case 1 were Lance Armstrong $17.36,
John Elway $33.48, and Lambeau Field $48.10. The overhead allocation rate for unframed prints, such as the unframed Lance Armstrong print in question 3, decreased under ABC compared to the amount of overhead that was allocated under the traditional approach in Case 1. Why is this the case? What are the potential implications for the company?
5. Explain why the overhead cost related to website optimization was fi rst divided into two categories (unframed prints and framed prints) and then allocated based on number of prints. 6. When allocating the cost of website optimization, the decision was made to initially a llocate the cost across two categories (unframed prints and framed prints) rather than three categories
(unframed prints, steel-framed prints, and wood-framed prints with matting). Discuss the pros and cons of splitting the cost between two categories rather than three.
7. Discuss the implications of using operating capacity as the cost driver rather than the expected units sold…...

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