Answer the following questions using the information below:
Chess Woods Limited produces two products: wooden chess pieces and wooden inlaid chess boards.Under their traditional cost system using one cost driver (direct manufacturing labour hours),the cost of a set of wooden chess pieces is $325.00.An analysis of the activities and their costs revealed that three cost drivers would be used under a new ABC system.These cost drivers would be equipment usage,storage area for the material and types of wood used.The new cost of a set of chess pieces was determined to be $298.00 per set.
-Given this change in the cost structure:
A)the costing results for chess pieces under the new system depend on the adequacy and quality of the estimated cost drivers and costs used by the system.
B)chess pieces are definitely more accurately costed.
C)chess will now have a lower sales price.
D)chess pieces have benefited from the new system.

Question

Quizplus · Accepted Answer

The change in cost structure depends on the adequacy and quality of the estimated cost drivers and costs used by the new ABC system. It cannot be determined whether chess pieces are definitely more accurately costed, whether the sales price for chess will now be lower, or whether they have simply benefited from the new system without analyzing the new cost drivers and costs. Therefore, only choice (A) is the best answer.

Answer the Following Questions Using the Information Below