Term
| symptoms that you may need a new cost system (1-3) |
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Definition
1. products that are difficult to produce are reported to be profitable.
2. profit margins cannot be easily explained.
3. the results of bids are difficult to explain. |
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Term
| flaws in system design (1 and 2) |
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Definition
1. only DLH are used to allocate overhead from cost pools to the products.
2. only volume-related allocation bases are used to allocate overhead from cost pools to products. |
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Term
| flaws in system design (3 and 4) |
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Definition
3. cost pools are too large and contain machines that have very different overhead structures.
4. the cost of marketing and delivering the product varies dramatically by distribution channel; accounting system effectively ignores marketing costs. |
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Term
| symptoms that you may need a new cost system (4-6) |
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Definition
4. competition's high-volume products appear to be priced at unrealistically low levels.
5. vendor bids for parts are considerably lower than anticipated.
6. customers ignore price increases, even without a corresponding increase in cost. |
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