Cost Accounting Problems
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What should management consider when deciding whether or not to drop an unprofitable customer?
Do you think the implementation of ABC is disruptive to the financial accounting system? Being "very time consuming and more expensive to conduct .........." Has this serve to discourage companies who probably need to use ABC from going in that direction? Or, they just do not want to bother to try ABC?
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This solution is comprised of a detailed explanation to answer whether the management should decide to drop an unprofitable customer or not.
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What should management consider when deciding whether or not to drop an unprofitable customer?
Before the management decide whether or not to drop an unprofitable customer, they should consider the relevant costs that will be affected by dropping the unprofitable customer. For example, the variables costs related to the production will be dropped, but certain fixed overhead costs and indirect overhead costs might be reduced or remained the same. ...
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