Tutorial 3 - ccc PDF

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1. Distinguish between arbitrary and cause-and-effect allocations. (p. 45) Where allocation bases are significant determinants the terms cause-andeffect allocations or driver tracing are used. Where a cost allocation base is used that is not a significant determinant of its cost, the term arbitrary allocation is used. An example of an arbitrary allocation would be if direct labour hours were used as the allocation base to allocate the costs of materials receiving. 2. Explain how cost information differs for profit measurement/inventory valuation requirements compared with decision-making requirements. (pp. 46–47) Manufacturing organizations assign costs to products for two purposes: first, for internal profit measurement and external financial accounting requirements in order to allocate the manufacturing costs incurred during a period between cost of goods sold and inventories; second, to provide useful information for managerial decisionmaking requirements 3. Describe the two-stage overhead allocation procedure. (pp. 50–51)

4. Describe two important features that distinguish between activity-based costing and traditional costing systems. (p. 57)...