Aqua Company produces two productsAlpha and Beta. Alpha has a high market share and is produced in bulk. Production of Beta is based on customer orders and is custom designed.
Also, 55 of Beta's cost is shared between design and setup costs, while Alpha's major portions of costs are direct costs. Alpha is using a single cost pool to allocate indirect costs. Which of the following statements is true of Aqua?
A) Aqua will overcost Beta's direct costs as it is using a single cost pool to allocate indirect costs.
B) Aqua will undercost Alpha's indirect costs because alpha has high direct costs.
C) Aqua will overcost Alpha's indirect costs as it is using a single cost pool to allocate indirect costs.
D) Aqua will overcost Beta's indirect costs because beta has high indirect costs.
Question 2
Which of the following groups of accounts increase with a credit?
a. capital, revenues, expenses
b. assets, capital, revenues
c. liabilities, capital, revenues
d. none of these
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