Tellespan Company's newest product is losing money because of low sales volume. Market surveys suggest that the product is priced higher than its competition. The company uses an activity-based costing system and believes the product is priced fairly in relation to its cost. What is the most logical strategy for Tellespan to pursue? Use a traditional costing system that assigns a lower amount of estimated cost to the product. Lower the selling price of the product with the hope of increasing market share to improve profits. Employ a target pricing system. Add more features to the product to make it more attractive to customers. The Carolina Furniture Company manufactures kitchen cabinets. The company has always used direct labor cost to allocate overhead to its two cabinet lines, Heritage and Contemporary. The manufacture of both lines has been labor intensive. Recently, the company automated production of its Contemporary line of cabinets. It continues to use labor dollars as the overhead allocation base for both lines. This practice will likely result in which of the following? Overhead cost will be allocated accurately between the two lines. Too much overhead cost will be allocated to the Heritage line. Too much overhead cost will be allocated to the Contemporary line. None of the above. The Cargo Company produces three products. It is considering eliminating one of these products because of reported losses. Which of the following costs should not be considered in making this decision? factory-wide depreciation costs material costs packaging costs set-up costs Pacific Northwest Ski Company makes both traditional skis and new parabola-shaped skis that are less stable but turn more easily. During 2011, the company produced 10,000 pairs of traditional skis and 7,000 pairs of new skis. Both types of skis required 3 hours of direct labor per pair of skis. Materials handling costs to transfer material to different workstations amounted to $20,000. The traditional skis used 150 hours of materials handling time and the new skis used 170 hours. Assuming that all overhead cost is allocated using an activity-based cost system, the total amount of materials handling cost assigned to the new skis would be $10,000. $10, 625. $9, 375. $8, 235. Setup costs for XYZ's two products amounted to $2,000. The company used 1, 200 direct labor hours to produce product A and 2,000 direct labor hours to produce product B. Both products required the same number of setups. XYZ uses a company-wide overhead rate to allocate overhead based on direct labor hours. Based on this information Product A is undercoated by $750. Product A is overcosted by $1, 250. Product B is overcosted by $250. Product B is undercosted by $500
