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Requirement 3. Compare the costs of the doors in requirements 1 and 2. Why do the simple and activity-based costing systems differ in the cost
Requirement 3. Compare the costs of the doors in requirements 1 and 2. Why do the simple and activity-based costing systems differ in the cost of an interior door and an exterior door? Relative to the ABC system, the simple costing system overcosts interior doors and undercosts exterior doors. Under the simple costing system, the volume of the production of interior doors is driving the amount of overhead allocated to the interior doors. The ABC study reveals that each exterior door requires more production runs, material moves, and setups . This is reflected in the higher indirect costs allocated to exterior doors in the ABC system. Requirement 4. How might Darling Doors, Inc., use the new cost information from its activity-based costing system to address the declining market share for interior doors? (Select all choices that apply.) A. Darling Doors, Inc. can use the information revealed by the ABC system to change its pricing based on the ABC costs. B. Darling Doors, Inc. should consider increasing the price of its interior doors depending on the competition it faces in this market. C. Darling Doors should consider increasing the price of its exterior doors, depending on the competition it faces in this market. D. Darling Doors, Inc. should consider decreasing the price of its interior doors to be more competitive. E. Darling Doors, Inc. should consider decreasing the price of its exerior doors to be more competitive. F. Darling Doors can use the ABC information to improve its own operations. It could examine each of the indirect cost categories and analyze whether it would be possible to deliver the same level of service, but consume fewer indirect resources, or find a way to reduce the per-unit-cost-driver cost of some of those indirect resources
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