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timer Asked: Jun 28th, 2018
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Question description

1.Why is direct labor a poor base for allocating overhead in many companies?

2.What types of costs should not be assigned to products in an activity-based costing system?

3.Why are there two stages of allocation in activity-based costing?

4.When activity-based costing is used, why do manufacturing overhead costs often shift from high-volume products to low-volume products?

5.Why is the activity-based costing described in this chapter unacceptable for external financial reports?

100 words each

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School: New York University

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Q. 1
Direct labor costs are a poor base for allocating costs because of the business
environment which changes and technology changes might replace human labor. Therefore many
tasks that were previously performed by laborers will is performed by machines, and this falls
within the overhead costs. Management of new products and services, which has significant
complexities requires the incorporation of vast overhead resources for instance production
schedules and product design engineers. These overhead resources are not directly correlated
with direct labor-hours or even machine hours. This, in turn, r...

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