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How should the costs associated with the idle capacity be assigned? A.) to product A&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)
B) Directly to the income statement as idle capacity
I think answer is D
because idle capacity is due to efficiency improvement and not due to decrease in demand,
Option C
Directly to income statement, as its a administrative loss
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.
C.) to sales and marketing since they are responsible for generating demand
OPtion B. Charge directly to income statement
D.) to plant overhead and allocated to all products the plant produces
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