4. It is not surprising that the Y-30 “sells itself” since the company is sell-
ing it at an apparent loss of $62.80. This probably explains why Branson
Company couldn’t meet Cutler Products’ price.
In addition, Cutler Products’ distorted unit costs explain why Branson
Company is able to undercut Cutler’s price on the X-20 units. Cutler’s
management thinks that the X-20 costs more to manufacture than it
really does according to the activity-based costing system.
Case 8-32 (continued)
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