I'd like to know your point of view.

Production Line 1 produces products A&B. It has 20% idle capacity as a result of efficiency improvements.

Question

How should the costs associated with the idle capacity be assigned?
A.) to product A&amp;B based on volume, sales price, product cost or some other driver.
B.) directly to the income statement as idle capacity
C.) to sales and marketing since they are responsible for generating demand
D.) to plant overhead and allocated to all products the plant produces
(Question from IMA's Inside Talk Webinar: Conceptual Framework for Managerial Costing)

Sara Khan · Answer

B) Directly to the income statement as idle capacity

Ednalyn Banuelos, CMA · Answer

Thank you for finding time to answer, my colleagues! The best answer is letter C.  Since sales and marketing people are those that are incharge of promoting the products and getting orders from the customers to make advantage of the production's idle capacity.

Urslan Ali · Answer

I think answer is D

because idle capacity is due to efficiency improvement and not due to decrease in demand,

Syed Hyder · Answer

C

Altaf Bhoon ACA · Answer

<p>Option C</p>

Malik Khalid Mahmood · Answer

Directly to income statement, as its a administrative loss

Qaiser Rehman Qaiser Rehman · Answer

C is the Right Answer.

Because Idle capacity will be charged to sales and marketing department that are responsible for creation of demand in the market.

مستخدم محذوف‎ · Answer

C - Is the answer

abram william · Answer

C.) to sales and marketing since they are responsible for generating demand

Wasif Ali · Answer

OPtion B. Charge directly to income statement

Ezzidin Ibrahim · Answer

D.) to plant overhead and allocated to all products the plant produces

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I'd like to know your point of view. Production Line 1 produces products A&B. It has 20% idle capacity as a result of efficiency improvements.

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