Managerial Accounting by Ronald Hilton 10 edition Chapter 4 Last Case/Question L

Question

Managerial Accounting by Ronald Hilton 10 edition Chapter 4 Last Case/Question Lycoming Leather Company question has 11.5 cost and the answer has 13. After looking at the above case question and answer chose the following one option: In comparing your answers computed in Part 1. of this case to the company's current cost per belt used for planning and control purposes, which of the following would be the best course of action for management? 1)Management should investigate to determine whether production costs can be reduced. If not, then the current cost used for planning and control purposes should be changed to reflect the firm's actual experience. 2)Management should do nothing because the difference in the two amounts is insignificant. 3)Management should change the cost used for planning and control purposes to the newly computed amount and increase the selling price of the belts accordingly. 4)Management should change the cost used for planning and control purposes to the newly computed amount. However, the selling price of the belts should not change.

Explanation / Answer

correct option is "A" )Management should investigate to determine whether production costs can be reduced. If not, then the current cost used for planning and control purposes should be changed to reflect the firm's actual experience.

The management budget should be based on actual data and so they must change there estimates to reflect actual data

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