Answer the following questions using the information below:
Whitman Printing has contracts to complete weekly supplements required by forty-six customers. For the year 20X5, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.
For 2010 Whitman Printing decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:
During 2010, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:

-It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that:
A)product costs will reflect their relative consumption of resources
B)nonvalue-added costs can be eliminated
C)there is less likelihood of cross subsidizing of product costs
D)All of these answers are correct.

Question

Answer the following questions using the information below:
Whitman Printing has contracts to complete weekly supplements required by forty-six customers. For the year 20X5, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.
For 2010 Whitman Printing decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:
  During 2010, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:
 
-It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that:
A)product costs will reflect their relative consumption of resources 
B)nonvalue-added costs can be eliminated 
C)there is less likelihood of cross subsidizing of product costs 
D)All of these answers are correct.

Quizplus · Accepted Answer

By using cost pools based on cost drivers such as design changes, setups, and inspections, product costs will more accurately reflect their relative consumption of resources, nonvalue-added costs can be eliminated, and there will be less likelihood of cross subsidizing of product costs. Therefore, all of the given answers are correct.

Answer the Following Questions Using the Information Below