Canton's Corp. manufactures two sizes of ceramic paperweights, regular and jumbo. The following information applies to their expectations for the planning period:
| Cost Pool | Overhead Costs | Activity-cost driver |
| Materials handling | $43,000 | 98,000 orders |
| Machine maintenance | $400,000 | 15,000 maintenance hours |
| Setups | $269,630 | 45,700 setups |
| Inspections | $144,840 | 21,300 inspections |
| Total support costs | $857,470 |
Expected direct costs amounts to $9,130,000 for the period. Support cost requirements of both products are substantially different from one another. Canton uses an ABC costing system.
Which of the following statements is true of implementing an ABC system?
◦ Managers should never compromise on the cause-and-effect relationship of cost drivers and costs.
◦ The three guidelines for refining costing systems should be ignored while implementing an ABC costing system.
◦ The heterogeneous cost pools give managers greater confidence in the activity and product cost numbers from the ABC system.
◦ Identifying the cost-allocation bases defines the number of activity pools into which costs must be grouped in an ABC system.
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Punch bowl with view of Canton.
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