Which of the following statements are true about what happens when the percentag

Question

Which of the following statements are true about what happens when the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)

a) When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, costs are shifted from the processing orders cost pool to the supporting customers cost pool.

b) When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, costs will be shifted from customers who order more frequently to those who order less frequently.

c)When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, the customer margins of those who order more frequently will increase relative to the customer margins of those who order less frequently.

Explanation / Answer

All of the a,b,c options are correct.

Shifting of cost will result in moving of the cost from processing of order to customer support. It will result in less cost allocation to those ordering frequently. Therefore, Customer margin of customer buying more frequently will increase.

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