Question

Indicate whether each of the following statements is true or false.

_____ Activity-based costing always delivers significantly more accurate cost allocation than does volume-based costing.
_____ A special order decision involves an offer to purchase goods at a price that is lower than normal.
_____ To analyze a special order decision, a manager should identify differential costs and revenues.
_____ A special order should be accepted if avoidable costs exceed differential revenue.

Answer 1

1) True
ABC give more accurate cost allocation as it takes into
account the estimated cost for each activity based on
cost drivers.
2)True
In special order is generally the price offered is less than the
selling price of the product hence differential analysis is done
3)
TRUE
To accept special order a manager has to do differential analysis
which includes differential revenue and cost. If revenue is more than
differential cost than order can be accepted otherwise rejected
ans 4 False
Avoidable cost should be less than differential revenue
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