Case Study: ABC Retail Stores ABC Retall Stores is a well-established retall chain with multiple locations across the country. The management of ABC Retail Stores is keen on optimizing their product pricing strategies to maximize profits. To achieve this, they've implemented various cost accounting measures. Let's explore a scenario to test your understanding of their cost accounting strategies. Case Scenario: ABC Retail Stores offers a range of products, from electronics to clothing. They are particularly interested in understanding the costs assoclated with two product categories: Electronics and Clothing. - Electronics: This category includes items like smartphones and laptops, which are highly customizable and subject to frequent price fluctuations. - Clothing: This category consists of clothing items like shirts and pants, which have relatively stable prices and limited customization options. To refine their pricing strategies, ABC Retail Stores has implemented Activity-Based Costing (ABC) to allocate costs more accurately. They have identified the following cost pools and cost drivers: - Cost Pool 1: Product Handling Costs - Cost Driver: Number of product handling hours - Cost Pool 2: Product Customization Costs - Cost Driver: Number of customization requests - Cost Pool 3: Inventory Holding Costs - Cost Driver: Average inventory value Now, let's proceed to the questions: Question 1: Why has ABC Retail Stores implemented Activity-Based Costing (ABC)? A) To determine product sales volumes B) To allocate costs more accurately C) To track employee attendance D) To analyze customer demographics Question 2: Which product category (Electronics or Clothing) is likely to incur higher Product Customization Costs based on the ABC allocation method? A) Electronics B) Clothing C) Both Electronics and Clothing will have the same Product Customization Costs D) It cannot be determined