1. Describe the changes in cost structure that are likely to have occurred at Brown’s
Bakery over the last 25 years, and explain their causes.
2. Do you think that the existing cost system understates or overstates the cost of:
a) a meat pie?
b) a vegetarian quiche? (Explain your answers)
3. Explain how an activity-based costing system could overcome the deficiencies
inherent in the existing costing system.
4. What factors should Knight consider when deciding whether to use an activity-based
costing system?
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