1. What are the three criteria for the design of cost management systems? 2. What are the characteristics of the following three costing systems: (a) job costing, (b) process costing, and (c) operations costing? How are they similar? How do they differ? 3. Describe the predetermined overhead rate (POHR). What is the role of the POHR (how is it used) in product costing? Why does it matter what allocation base is used to determine the POHR? What criteria are important in determining the choice of an allocation base? 4. It is your first day at a new job and you talk about the themes of cost system design. One of your new colleagues asks, "If different cost information is used for different purposes, does that mean we do not know what something costs? I thought that was what a cost system reported. How would you respond? 5. Bea O Problem, a cost accountant, prepares a product profitability report for Amanda Hugginkiss, the production manager. Much to Bea's surprise, almost 1/3 of the company's products are not profitable. She says, "Amanda, it looks like we will have to drop 1/3 of our products to improve overall company profits. It's good thing we decided to look at profitability by product." Do you think Amanda will agree with this approach? Why? 6. Your colleague says, If a company only has one product, it doesn't matter how we allocate cost, because the result will always be the same. Do you agree? Explain. 1. What are the three criteria for the design of cost management systems? 2. What are the characteristics of the following three costing systems: (a) job costing, (b) process costing, and (c) operations costing? How are they similar? How do they differ? 3. Describe the predetermined overhead rate (POHR). What is the role of the POHR (how is it used) in product costing? Why does it matter what allocation base is used to determine the POHR? What criteria are important in determining the choice of an allocation base? 4. It is your first day at a new job and you talk about the themes of cost system design. One of your new colleagues asks, "If different cost information is used for different purposes, does that mean we do not know what something costs? I thought that was what a cost system reported. How would you respond? 5. Bea O Problem, a cost accountant, prepares a product profitability report for Amanda Hugginkiss, the production manager. Much to Bea's surprise, almost 1/3 of the company's products are not profitable. She says, "Amanda, it looks like we will have to drop 1/3 of our products to improve overall company profits. It's good thing we decided to look at profitability by product." Do you think Amanda will agree with this approach? Why? 6. Your colleague says, If a company only has one product, it doesn't matter how we allocate cost, because the result will always be the same. Do you agree? Explain
