Question

4.2 a. What is meant by a business’s underlying cost structure?

b. Why is this information valuable to managers?

4.10 a. What are the three primary methods of cost allocation?

b. What are the differences among them?

Answer 1

A. underlying cause structure of the business will mean that the overall presence of cost of equity and cost of debt along with the cost of capital of the business and it will also mean that the overall cost to change include the business in relation to the revenue generated by it.

B. There will be various types of informations which are macro as well as micro in nature and they are affecting the position of the company in the long run and the c they will be important to the managers and they will include information like changes in the monetary policy along with the interest rates and there will be a change in the demand and supply pattern of the company so this will be the changes which will affect the manager

C. Three primary method of the cost allocation will be plantwide allocation ,departmental allocation and activity based allocation

D. differences among them is that plantwide allocation will always be trying to allocate the cost on the basis of the overall business where as departmental wise allocation will be done on the basis of the department allocation and activity based allocation will be done on the basis of the users of the particular cost in various assets in their respective proportions.