Question
Bard Inc. is currently comparing a potential implementation of Activity-Based Costing (ABC) with their current use of traditional costing and comparing the results. Bard creates
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Bard Inc. is currently comparing a potential implementation of Activity-Based Costing (ABC) with their current use of traditional costing and comparing the results. Bard creates two products: Candy Bars, 60,000 units; and lollipops, 82,000 units. Under ABC, Manufacturing Overhead (MOH) is allocated at $43,877.44 to candy bars and $32,781.90 to lollipops. Under traditional costing, MOH is allocated at $46,707.87 to candy bars and $29,915.47 to lollipops. Which of the following statements is correct?
Unit cost will be higher for lollipops under traditional costing than ABC.
Unit cost will be lower for candy bars under ABC than traditional costing.
Unit cost will be lower for candy bars under traditional costing than ABC.
Unit cost will be lower for lollipops under ABC than traditional costing.
Corner Cupcakes Co. is selling cupcakes for $8 for a box of four. Corner has fixed costs equaling $8,800 per month, and its accounting firm has determined the contribution margin ratio on each box of donuts to be 55%. Corner is currently averaging monthly sales of 2,600 boxes of donuts, and the company has a tax rate of 40%. Based on this information, which of the following statements is correct?
a. | Corner Cupcakes currently has a margin of safety of 400 boxes of donuts. | |
b. | Corner Cupcakes currently has a margin of safety of $4,800 in monthly sales revenues. | |
c. | Corner Cupcakes currently has a margin of safety of 450 boxes of donuts. | |
d. | Corner Cupcakes currently has a margin of safety of $3,000 in monthly sales revenues. |
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