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6. The Phone Division has been using the same cost accounting system for over 10 years. Explain why its cost accounting system may be outmoded.
6. The Phone Division has been using the same cost accounting system for over 10 years. Explain why its cost accounting system may be outmoded. What factors determine when a new cost accounting system is warranted? The Phone Division has added a number of different products over the years. The different products seem to consume overhead resources in different proportions. There is some belief that using only unit-based drivers is inadequate for assigning overhead costs. Furthermore, 10 years have passed since the current cost accounting system was adopted, information processing technology has advanced, and it is cheaper to operate more sophisticated cost accounting systems. Also, if the current system is overcosting the low-volume products as suggested, then bad pricing decisions are being made that could be very costly for the company-especially considering the increased competition. Increased measurement costs and increased error costs are the major factors signaling the obsolescence of the current system and the need for a new system. For CTB, measurement costs have likely decreased. Evidence indicates that there may be good cost assignments, and the cost of bad decisions has gone up. Taken together, a new system seems justified
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