The activity-based costing system
A) is the most appropriate method of cost accounting for rigid hierarchical organizations.
B) effectively departmentalizes an organization based on its core functions, such as human resources and maintenance.
C) provides a more accurate picture of how costs should be charged to products and services.
D) assumes that organizations are bureaucratic "machines" that can be separated into component functions.
E) fails to allocate costs across business processes and is less effective than traditional methods of cost accounting.
C) provides a more accurate picture of how costs should be charged to products and services.
Activity-based costing (ABC) is a method of cost accounting designed to identify streams of activity and then to allocate costs across particular business processes according to the amount of time employees devote to particular activities. ABC can highlight where wasted activities are occurring or whether activities cost too much relative to the benefits provided. It provides a more accurate picture of how costs should be charged to products and services.
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Scenario 17.1 Use the following to answer the questions. Jafrum, Inc. is a wholesale supplier of motorcycle accessories, clothing, and tools to various motorcycle retail stores around the country. Jafrum does not manufacture these items, but sells them to other retailers and also sells its merchandise through its website. Larry Thompson is one of the salespeople for Jafrum, and is responsible for obtaining new customers, increasing sales to current customers, and visiting the retail stores throughout the country. Recently, he has been given the sales objective from Jafrum's management to increase sales dollars by 15% in the coming year by adding new customers. Larry's current compensation is based on a $1,000 per month draw, plus 5% of all sales over $100,000. His salary last year
totaled $42,000. Management has given Larry the choice of going to a compensation plan where he will earn 15% of all sales, but no draw. Refer to Scenario 17.1. Larry is developing his list of potential new retail customers by accessing the yellow pages online. Here he finds the contact information for every motorcycle store in the 48 contiguous states, and eliminates those who currently are his customers. Larry is involved in which step of the personal selling process? A. Prospecting B. Preapproach C. Overcoming objections D. Closing E. Following up