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In fact, the old cost structure worked quite well in the past since the company produced a specialized line of products that was periodically consistent. This in the aspect that the products differed little or not at all in both unit and volume.
However, this cost method does not provide the best system for JDCW’s cost allocation. By using only three overhead rates the present system grossly undermines the true production costs since other activities of the production process are not acknowledged. The system also fails to compute material usage variances, which only further discredits the accuracy of the accounting cost structure...
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