Reference no: EM132511143

Cofission Electronics make small electronic parts. The management accountant at Cofission, Jasmine Vake, decides to implement an activity-based costing (ABC) system. She lists the following points to support her decision:

1. The recent cost report shows that the ratio of manufacturing overhead cost to prime costs is approximately 3:1.
2. Cofission is a small company.
3. Cofission has three product lines: basic parts (parts that are common to many products and many suppliers), customised parts (electronic parts that are highly customised to very specialised electric motors), prototypes (where Cofission Electronics need to design as well as manufacture these specialised electronic parts).
4. Cofission Electronics has recently implemented a flexible manufacturing system; this practically eliminates any setup costs; with this system, product customisation takes very little additional time.

Question 1: Which of these points support Jasmine's decision to implement an ABC system and which of these points contradict her decision? Why?