1. Board averaging leads to:
- a) variable product costs
- b) accurate service costs
- c) inaccurate product costs
- d) service product cost
- e) accurate product costs
2. Which of the following is not a behavioral issue that managers consider when they implement an activity-based costing system?
- a) education and training employees in ABC as a basis for employee empowerment
- b) gaining support of top management and creating a sense of urgency for the ABC effort
- c) seeking only small short run success as proof that the ABC implementation is yielding results
- d) creating a guiding coalition of managers throughout the value chain for the ABC effort
- e) seeking only large long run success as proof that the ABC implementation is yielding results
Average Variable Cost
Average Variable Cost refers to the cost which a firm incurs when it begins the production process. It changes with the variable used in production. It is highly dependent on the efficient use of resources. Higher average variable cost reduces the profitability of a company.
Answer and Explanation:
1. Option(C) inaccurate product costs is correct
This option is correct because broad averaging provides only average of large number of resources used in production. So, it can lead to inaccurate cost of each product.
2. Option(E) seeking only large long run success as proof that the ABC implementation is yielding results is correct
This option is correct because when a manager want to implement an activity based costing system than the gain to company should be higher in short run. The success of any plan depends on its return. This is not a behavioral issue.
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from Financial Accounting: Help and ReviewChapter 13 / Lesson 5